Spotify: Friend or Foe?

For the few that haven't heard of Spotify it's a program allowing the user to stream unlimited numbers of songs free of charge with the blessing of all the record companies whose artists are on the 8 million track database. So in effect it is a free to use legal music library with a vast range of music featuring anything you could possibly want to hear. At least it was. As you can imagine this model relied almost exclusively on advertising and in its first year (2008) the company lost 4.4 million dollars. Since this unsuccessful first year Spotify added a pay service which streams the music without ads and in higher quality. The system currently has 7 million users but only 250,000 of those are premium (paid) members.

The argument is why people would pay for a service when they can get the same content for free from the same program. It's a valid point and one which Spotify alongside the record labels are trying to neutralize. The service provided by Spotify is top notch but many people have argued independent labels and artists are suffering in this arrangement, the very artists most in need of revenue from services like this. Swedish music reporter Helienne Lindvall said "indie labels, as opposed to the majors and Merlin members (Merlin is a body that represent some of the larger indie labels like Domino and Beggars), receive no advance, receive no minimum per stream and only get a 50% share of ad revenue on a pro-rata basis."

This trickledown effect leaves the artist making very little, Swedish artist Magnus Uggla has been an established star in Scandinavia since the 70s, he withdrew his music from the database after claiming he made less in 6 months "than an average busker would in a day." This has been backed up by indie label Junior Racing who earned an unforgivable $3 from 55,100 streamed tracks. That works out at 0.00054 of a cent per stream for maths fans out there. Spotify have said they need time to establish themselves before they can offer more money to the artists.

While the Indies are waiting for Spotify to establish themselves, the major labels are being offered shares and large amounts to allow their music to be streamed. So what can Spotify do to remedy this situation? Very little.

The major labels have become accustomed to receiving large amounts of money and now that they own shares in the company they will use their new found sway to ensure this remains the norm. The other option would be to eliminate the free service and add a monthly charge which could then be used to put more money in the pockets of the independent artists and labels. If this was implemented many of the users would stop using the service, the same would happen if Spotify began using more adverts.

Interestingly, Pendulum's new release Immersion may show what the future holds for Spotify. Instead of the whole album being uploaded five tracks were put into the database, thus giving the listener a free taste of the music and allowing them to make a decision whether or not to buy the whole release. I personally do not have a CD player and listen to all my music through my computer the fact only a few of the tracks were available made me have to purchase in order to hear the whole release, whereas in the past i had no desire to buy the whole release because the whole album was available to me free and legally. However, Pendulum are already a well established band with a dedicated fan base, could this work for independent artists? There is only one way to find out.