On Withholding Music From Spotify & The New Economics Of Album Releases

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Guest post is Scott Perry of New Music Tipsheet and entertainment industry marketing and consulting firm Sperry Media.

Don't care what anybody says, artist has a right to withhold their music from streaming services in order to make a couple extra dollars from physical & downloads. It ain't greedy, it's business — if you can sell out Madison Square Garden in 10 minutes (Black Keys, pictured left), if you can sell out 3 nights at the Hollywood Bowl (Coldplay), if you are on the verge of sweeping the Grammys (Adele), the world can afford to pay full price for your art.

But then again, the #5 album on the charts last week sold under 30,000 units (Coldplay, btw), so how long do you withhold an album before opening it to streaming? Maybe this won't matter in 2 years, when revenue grows as streaming services have 30% market penetration (Apple 15%, Spotify 10%, the rest 5% combined), but for now, acts need to make as much money as possible from each channel without one area cannibalizing the other.

An Escalated Window Schedule

We're not too far off from an escalated window schedule, just like the movie industry — leak first single to blogs 8 weeks in advance, drop video 6 weeks in advance, preview album stream a week in advance on NPR, offer album as physical or download for first four weeks, then make it available to streaming services after maximizing album sales to fans (likely by week 4 — or earlier if one service is willing to pay for the exclusive).

So yes, there will be windows, albeit small windows — acts like Civil Wars and Bon Iver will need to do this in order to protect their revenue. These are the kinds of acts that can sell 50,000 units to their core fans in the first couple of weeks ($500k gross), but will need streaming services to keep growing their base in order to build their potential live audience base, especially since mainstream radio ain't exactly burning the airwaves with their tunes. This model will let them record an album for $50k, put up $50k for hard marketing and tour costs, and still make a few bucks after paying out their management and promo teams ($100k) — and that's before ticket, merch, and licensing revs kick in.

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  1. I think it really depends on whether someone is an album artist or not. There are very few album artists left. And although a few album artists have done really well in 2011, resulting in the fact that there was finally a rise in album sales, the trend points toward a decrease in album artists, as opposed to an increase.
    Check out Mark Mulligan’s thoughts on this: (scroll down to the ‘Adele Effect’ bit)

  2. If your “core fans” won’t buy your records because they are on streaming sites, then they aren’t your core fans. That’s a problem that stems from an artist not making a connection with the fans, and not helping the fans make the connection that buying THIS album ensures there will be a NEXT album.
    Streaming sites aren’t the problem. Engagement is the problem.
    Jason Parker

  3. People that stream, stream because they don’t want to buy, but rent, or if they do buy, they buy a small handful of music a year. Why discriminate against people that have shown they want to support music and labels, rather than stealing?

  4. “Artist has a right to withhold their music from streaming services in order to make a couple extra dollars from physical & downloads” True in every way!
    One question remains: can streams hurt sales in this stage? I doubt it. There is not enough market penetration yet. 10 million users in 12 countries with an total population of 590 million is nothing! And if streaming reaches 30% market share, the revenue will probably make up for lost sales. Time will tell.

  5. Because streaming revenues at this point in time are miniscule, and in the end the amount of paid vs stolen is still better in artists/labels eyes than paid vs stolen vs streaming.
    It’s not really a moral argument, it’s a business decision.
    It probably won’t be this way forever, but for now it is, and these artists in particular can afford to work this way.

  6. “People that stream, stream because they don’t want to buy, but rent, or if they do buy, they buy a small handful of music a year.”
    Not always true. Maybe that is true of some, but I stream so I can find new music to buy without spending money on music I might not like. In the past year I’ve bought 66 full-length albums, not to mention the Daytrotter lossless sessions, in addition to the monthly fee, which I buy when they are available (if I like them of course). Plus I pay for Spotify so I can listen to it on my phone.
    While I may be in the minority, I’m sure I’m not the only one who uses streaming like this. When I find an album that I really like, I buy it – directly from the artists’ site if its available there. There are music listeners who support the artists and I think we’re more plentiful than some suspect.

  7. Todays musicians are the generation which grew up listening to mp3 downloads, be it legitimate or not. They know the futility of selling albums as packaged entertainment product. They now recognise albums as a marketing product, a ‘pamphlet’ to advertise their live shows and merch incl. more authentic packaged product e.g. vinyl. This has been happening as far back as Radiohead In Rainbows 2007, Prince 20TEN free album with the Daily Mirror 2010. The goal posts have shifted.

  8. I’m like twhit. Premium spotify lets me preview music I might want to purchase, or support with a concert attendance. I am always going to buy music by artists I love, but for those in a less passionate category, Spotify still provides access without piracy. I frequently use Spotify to play music that I already own, just to put an extra milli-cent in the pocket of the people who created it. People who really love music know that music costs something to make, and will support their preferred artists with some cash. I see the phased release to streaming as a very sensible strategy.

  9. Spoify is good for consumers ad bad for artist. It’s up to you. As an artist on no budget I can’t and will never pay for slapping myself in the face. Trends come and go like banks these days. Fuk em all. Stick to your own guns.

  10. goes without saying, i got a couple of emails today from some concerned parties… here is my reply to one of them, which further clarifies my views:
    I hear ya man, but the proof is all around me with my peers – I am smack dab in the intersection of music fans who buy music AND use streaming services. and they all tell me that they are spending less on music, unless they absolutely have to have the physical piece.
    streaming is only used by 1% of americans, but that 1% are true music fans, who believe in music enough to buy it, who believe in music enough to try a service.
    and then all across america you have people who still buy music, but have yet to sign up for a streaming service.
    and one day soon, that will change. and when those people come on board, I hope everyone sees enough revenue come in to make physical & download sales revenue irrelevant.
    I have no doubt that streaming will be THE de facto means of personal on-demand consumption in the next couple of years. and I think the proper promotional partnership with streaming services can help boost artist awareness to where they do see a bump in physical sales.
    but until streaming drives the majority of artist revenue, I as a manager or a label would have a hard time justifying streaming day & date with other methods that currently pay a much larger portion of the bills.

  11. @Scott Perry: I agree. Sales are better on short term. Dunno if the 1% users of streamers are also the ones who stop buying. A fair number of them are the ones who stop downloading. Streams thus could well create additional revenue.
    Like I said earlier, time will tell. Just look at Sweden where 37% of the population uses Spotify an most of them on a daily basis.

  12. The artists & labels withholding their music from Spotify are alienating the fastest growing platform for music consumption. The same sort of withholding happened when iTunes came along & no one wanted to part with the revenue from CDs. How’s that working out?
    I’ll spend $120 on recorded music this year (Spotify Premium $10/month * 12), which is substantially higher than previous years & well above the national average for consumer spending on music. Artists & labels should be embracing this behavior rather than attempting to curtail it.

  13. Whether or not the artists and labels are alienating the fastest growing platform for music consumption is their decision to make, for their own reasons.
    Spotify is a consumer/fans’s dream.
    Not necessarily for every artist and labels at this point in time, and it’s their right to choose how to go. This could, and I believe it will change in the future, we just don’t know when and this is very much why many artists make the decisions that they do.
    For certain artists, the potential loss of revenue regarding streaming compared to a sale is negligible, or could be considered the Cost of Acquisition for a potential new fan (paying or otherwise). For others it’s a palpable difference. There is currently no metric for how streaming effects physical or digital sales, only speculation and a subjective idea of how it works from consumer to consumer, and on the whole.
    Would Coldplay, Adele or Black Keys sold more if they had streamed? Well never know, we may never know. Therein lies the rub.
    The $120 you spent through streaming can’t be compared to a sale or sales. It doesn’t work like that, it’s not meant to work like that, even Daniel Ek will tell you that.
    The value of the commodity through streaming is based on a completely different (and constantly shifting) set of variables than that of a single durable good that while can be easily acquired through piracy, when bought has a very specific return for the artist and label.
    In the end, if you respect an artist for their work, and who they are and they choose (for whatever reason) not to stream, I believe you should respect their business as well. Or don’t. But demonizing people or calling them greedy is uncalled for in my opinion. It behooves the consumer to have access to something for less. That makes sense to them, and myself as a consumer, but as an artist I see both sides.
    98% of artists are not living in mansions and spitting champagne, especially not now. When they do get the opportunity to monetize, it mostly likely won’t be for that long given the state of things as they are. Not everyone can tour for the rest of their lives. Not everyone can keep making records constantly, it doesn’t work like that.
    I agree that streaming overall if it gets to scale, with literally tens of millions of paid users would be superior to old model sales. But it’s not there yet.
    Time will tell.

  14. Who allows babbling nonsense like this on this site? What the hell am I supposed to get from this? It’s just an article with the words “Spotify” and “Itunes” in it with a bunch of big name acts. I almost feel like it’s not in English. There is literally no point to this piece. Epic.

  15. Can someone please tell me how Apple has 15% of streaming services market penetration, as cited in the article? What are they streaming??

  16. If I’m paying $10/month for what is supposed to be an all-inclusive music service; why would I double my monthly music spending to get an album from one act? Am I to believe that having access to one album is better than having access to over 15 millions songs? Of course not and as you stated, this is why Spotify is a music consumers dream.
    Sure, it’s the right of the artist/label to decide whether or not to stream. The problem is the message it sends. The bands withholding music are essentially saying, “The only way to truly support our work is to pay more than you should for our music.” It’s the same BS they’ve been pulling with CDs for years. It’s manipulative and insulting to the consumer.
    Artists have to start looking ahead & figure out how they’re going to be successful in an industry where album sales are non-existent. Even if the labels decide they’re unhappy with the revenue from Spotify & pull their catalogs it won’t bring consumers back to paid downloads. If the movie studios decided to pull their material from Netflix; would we see a resurgence of Blockbusters stores?

  17. Guess what? When someone wants to get an album and not pay for it, whether it is on spotify or not, there will always be a way and there has been since the creation of Napster. Don’t have your music on spotify yet like Lana Del Rey (that’s bc she doesn’t even have an album out yet and is performing on SNL but that’s another topic) and who is getting all the hits? Someone who was smart enough to remix it and get it up. No reason to fight it. But I do agree it makes sense to keep it off Spotify until record sales start to go down then. Might as well make as much profit as you can.

  18. “The only way to truly support our work is to pay more than you should for our music.”
    What a jackass thing to say. In world economies that constantly suffer from inflation, you guys are, at gunpoint, saying that artists need to devalue their product even more.

  19. Stu,
    I hear your argument, and completely understand it. I agree, as an artist that things are changing. The thing is, there’s an aspect of the old model that will always be around. As long as there are huge catalogs and artists controlled by enormous multi national corporations that do business like well, huge multinational corporations, this is the kind of stuff you’ll see.
    In regards to some other artists who might be on smaller labels or god forbid actually have control of all their rights, they’re cashing in their chips, and taking it where they can get it. If this type of commerce is in fact on it’s way out, why shouldn’t they attempt to take it for what it’s worth?
    If there is (and believe me, there is) a population that doesn’t see them selling their record and not streaming as manipulative, and they don’t see ten bucks a luxury for something they want and deem worthy of their hard earned cash, then they have a very valid reason to keep doing what they’re doing.
    You don’t fall into that category, that’s fine. But you also have to consider the actual sustainable and accessible revenue streams that are out there for artists. Terrestrial Radio is a monopoly, and a boys club locked down by the majors. Online Radio is getting somewhere, but still a pittance in the grand scheme. Mid to large venue touring is controlled by Live Nation, Ticketmaster, and their affiliates Stubhub.
    There’s a lot of bullshit. So in the end, yes, buying their record is the most feasible way for most artists to see a return.
    Now, If some of them knew about how great streaming music on Spotify was, would some of them jump on board and get hooked like the rest of us? Maybe. Maybe not. If they found out the artist barely got paid would they care? Again, who knows?
    There’s no way to know, and it’s not really worth arguing because again, there’s no metric that will show how these two things effect each other. I know it seems ridiculous (it does to me) but it honestly doesn’t appeal to everyone, in the same way that I’m about to cancel my Netflix account and just stick to my basic cable, on demand and local video store.
    It’s what works for me. Are some things about Netflix more convenient? Sometimes, but for me most of the time not now. So I’m out. They won’t miss me.
    That said, it took thirteen years for Netflix to get to the 26 Million subscribers it currently has now. If Spotify had that many paying subscribers, artists would be in a great place, and I guarantee, the old system would be pretty much gone.
    Until then, hang tight.

  20. I believe it’s because when you stream from The Cloud they have to pay out a performance royalty.
    Spotify pays 2 royalties, and while internet radio pays just the performance royalty.

  21. and that’s just my projection of what percent of music consumers will be streaming via apple when they inevitably launch a service — no science, no insider information, just my guess. but when apple does launch, they will have a majority of the business just by the sheer size of music buyers they already reach via itunes.

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