"To help protect House data, our IT policy generally prohibits the use of peer-to-peer (P2P) technologies while operating within the secure network," a spokesman for the Office of the Chief Administrative Officer told POLITICO this week. "While Spotify is currently not authorized, the CAO has and will continue to work with outside vendors to enable the popular services that improve member communication capabilities."

RIAA CEO Cary Sherman wrote to the Hill Tuesday to explain why Spotify shouldn't violate the House's IT policy and to lend a hand in getting the decision reversed: "These services are safe and secure, and assuring access to them not only respects the contractual relationship users may have with these services, but also achieves an important public policy goal of promoting legal, safe digital providers," Sherman wrote.

It may be symptomatic of Congress being susceptible to lobbyists' generally oversimplifying and misunderstanding complex technology. As EFF's Parker Higgins tweeted in response: "The years of indiscriminately vilifying p2p technology are now coming back to haunt the content industry." In particular, the policy may be a consequence of three hearings on filesharing in the House from 2007 to 2009, which received testimony criticizing filesharing: "Inadvertent File Sharing over Peer-to-Peer Networks" on July 24, 2007, before the House Committee on Oversight and Government Reform; "H.R. 2221, the Data Accountability and Protection Act and H.R. 1319, the Informed P2P User Act" on May 5, 2009, before the House Committee on Energy and Commerce, Subcommittee on Commerce, Trade, and Consumer Protection; and "Inadvertent File Sharing over Peer-to-Peer Networks: How It Endangers Citizens and Jeopardizes National Security" on July 29, 2009, before the House Committee on Oversight and Government Reform. This context suggests that maybe those hearings caused technophobic Congressmen to panic, leading to a regulation that is now mindlessly enforced as a part of House IT policy.

Musicmetric found that music file downloads using BitTorrent tend to increase in countries that don't have legal music streaming services such as Spotify. Among the top 10 countries with the fastest growing BitTorrent market share in the first half of 2012, only one, France, had Spotify.

Conversely, in the top 10 countries where BitTorrent activity has decreased fastest, five have access to Spotify.

Clearly, the best way to support Zoe (and other independent artists like her) is to purchases directly from the artist. Just by taking a look at the pie chart, it is evident that the vast majority (nearly 97%) of her recorded music revenue comes from fans purchasing her music as opposed to streaming it. Less than $300 came from Spotify, while more than $45,000 came from iTunes.

“Music sales have been a consistent 60-70% of my total income,” Zoe told Hypebot. “The rest comes from concert fees and film/commercial licensing.”

“The income of a non-mainstream artist like me is a patchwork quilt and streaming is currently one tiny square in that quilt,” Zoe said in her Google Doc. 

Streaming is not yet a replacement for digital sales, and to conflate the two is a mistake. I do not see streaming as a threat to my income, just like I've never regarded file sharing as a threat but as a convenient way to hear music. If people really like my music, I still believe they'll support it somewhere, somehow.

I've said multiple times what my issue with Spotify is: fairness. I care about making the playing field level for all recording artists: signed or unsigned. Let it be a meritocracy.

I wish Spotify would do more to facilitate the connection between listeners and artists - i.e. show that the artists is playing nearby, or add links to buy music. It's early days, so maybe this will happen eventually.

My financial picture would be worse if I was on a record label. Some people say that if I was on a record label, I'd have a larger reach and therefore would be making more money. To this I'd like to point out that I make instrumental cello music. There is about as much chance of my music becoming mainstream as there is of me being elected President of the USA (hint: not possible, I was born in Canada and there are naked pictures of me at Burning Man). While it is probably true that the right label could help with the reach part, I don't think they could help me enough to offset their cut, and you know what….no label has ever approached me and the ones I've approached said no, so I'm guessing they think the same thing.

“We’re back to the same revenue levels as during 2004, and if the development continues in the same way we’ll be back on turnover similar to those during the “golden days” of the CD in just a few years,” says Universal Music Sweden’s MD Per Sundin.

“We’ve seen massive change in music consumption, where music fans are now listening to more music than ever, in an entirely legal environment. This means that revenues are increasing all the time, and artists get paid every time their music is played. Our artists get significant revenues from Spotify, which is our biggest income source for Sweden. A positive side effect is that we’re investing a lot in new talent.”

Mark Dennis, CEO of Sony Music Sweden, makes the same point: “One of the most gratifying consequences of this is that it gives us the opportunity to sign more artists, and record more new Swedish music than ever. In fact, for most of our artists, streaming music now represents the majority of the revenue.”

Spotify’s payouts to Merlin’s 10,000-plus indie labels rose 250 percent from the year ending March 2011 to the year ending March 2012. More importantly, the revenue per user (RPU) “has grown significantly alongside the overall revenue growth and is currently the highest it has been since the launch of the service,” said Caldas. “We see consistent, ongoing growth on revenue per user, revenue per stream, and the total revenue the service brings.”

Anyone who doesn’t think we’re paying a fair cut hasn’t seen the numbers we pay out. By far the vast majority of the money we’re making goes back to the owners of the music – about 70%. When compared to iTunes, the average listener spends $60 dollars a year into the creative community, whereas Spotify Premium users spend $120 per year. As “the pie gets bigger” so to speak, so do the royalty payments. The growth of the platform is proportional to the royalty pay out and since inception we’ve already doubled the effective per play rate.

While we’re at it, why don’t we save the printers’ jobs too. And bring back Smith-Corona. That company had employees…

I believe artists should be paid. But that does not mean they should be paid the same way they used to be

To be fighting file-sharing is akin to protesting dot matrix printers. File-trading is on its way out. Because it takes too much time to do it. And you don’t fight piracy with laws, but economic solutions. It doesn’t pay to steal if you can listen instantly on Spotify and its ilk.

And please stop bitching about the low payouts… That’s like saying Apple should liquidate and give the proceeds back to its stockholders, which is what Michael Dell so famously said in the nineties. Spotify is a trojan horse. You get hooked, and then you pay for higher quality on your mobile. Facebook stock gets hammered because of its inadequate mobile strategy and you’re not smart enough to see the connection to music??? You can’t get Spotify and its brethren on your handset without paying. And you will. Because you like the convenience of having all your music at your fingertips all the time.

To see why, consider that the IBM PC XT had a 10 Mbyte hard drive when it was launched in 1983, which meant you couldn't even fit a single song on it. Similarly, the first widely-used modem, the 1981 Hayes Smartmodem, had a maximum speed of 300 baud: to transfer a digitized song using a dial-up connection would have taken around 500 hours.

With those kind of figures, it's easy to see why the recording industry underestimated the threat that file sharing would become once the Internet arrived: based on the past, it was almost inconceivable that people would ever swap music between computers. Of course, once that did start to happen, and the shape of the future became obvious to many, the industry nonetheless wilfully ignored the facts and the trends at every turn, when instead it should have taken the lead in re-inventing media for the Internet age.

That woeful history of refusing to accept the implications of rapidly-advancing technologies makes this prediction, found via Slashdot, even more fateful:

Technologies that will make it possible to expand disk density include heat-assisted magnetic recording (HAMR), which Seagate patented in 2006. Seagate has already said it will be able to produce a 60TB 3.5-in. hard drive by 2016.

Obviously, few people will choose to do that, but storing your favorite million songs will not only be realistic, it will be cheap -- and even portable. Provided the transfer rate to and from such disks also keeps up with the growth in capacities -- an indispensable technological requirement, otherwise they become impossible to use -- this means that people will be able to move around huge collections of music, without ever touching an Internet connection. That makes all those three-strikes plans moot, since you won't actually need your broadband line in order to swap files with friends. You'll just plug in your portable hard drives to a common computer and exchange stuff directly (as probably already happens with today's terabyte-sized portable disks.)

In an ideal world, we would also see a kind of constant scaling of the intelligence of the recording industry, such that by 2016 it would finally accept that trying to stop sharing -- whether online or off -- is simply pointless. Somehow, though, I think we'll just have to make do with the other variants of Moore's Law.

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Unfortunately, this is why investing in Spotify may not be wise and why firms like Andreessen-Horowitz may have passed. It’s a great service with a big lead on other music streamers. But as it scales and gains traction, the record labels will increase their tax. There’s no way Spotify will pay the same fees if it hits 15 million subscribers as it does now. That will make it harder for Spotify to return the multiple most investors want any time soon.

In most industries, if a partner charges you too high a licensing fee you can go to one of their competitors. That’s not how it works in music. You can’t get a cheaper equivalent to Michael Jackson or Lady Gaga like you could for enterprise software. If you want “Thriller” you have to pay whatever the labels ask. And even if it does, Spotify isn’t getting exclusive access to that content.

Though the specifics of the deals between record labels and music streaming services are secret, many details have been leaked over time, and it's long been known that they are onerous and one-sided. Last year, Michael Robertson of MP3tunes explained how the general structure of the deals make growth and innovation extremely difficult, while collusion among the labels eliminates any last shred of competition and ensures that a service like Spotify can never negotiate better terms. Investors know that music startups essentially live or die at the behest of the legacy industry, and investors are smart—they aren't about to bet millions on record labels making good decisions.

Economically speaking, none of this is surprising, because copyright is a monopoly and this is what monopolies do. They distort the free market and allow the monopolists to control the competition. Adding insult to injury, recording industry defenders like to tout streaming services as examples of how the industry embraces innovation, and RIAA CEO Cary Sherman recently said he was surprised that Spotify wasn't generating more revenue for the labels. To anyone who understands how difficult the labels have made life for these startups, claims like these don't pass the laugh test—and Spotify's difficulty securing funding is just more evidence of this fact. Its numbers would make it a hot investment property if it operated in any space other than music, but because it is shackled to a dying industry with a long history of technophobia, investors take their money elsewhere. Who can blame them?

That's also why Spotify has only just launched in the important market of Germany. The main problem is the notoriously unhelpful German music collection society GEMA. Surprisingly, Spotify still doesn't have a license, but it turns out that's only one of its problems in the country. Via Twitter, Arjan points out that Germany's Federal Commissioner for Data Protection, Peter Schaar, and Berlin's Data Protection Commissioner, Alexander Dix, are both unhappy with Spotify, since it seems to be incompatible with Germany's data protection laws (German original.)

The problem arises from the fact that Spotify requires users to have a Facebook account to sign up. That means it is not possible to use the service anonymously or pseudonymously -- as required by German law. It's not yet clear what the data protection commissioners intend to do about this -- Dix, for example, is simply recommending that Spotify changes its business model to render it compatible with German laws.

It's rather appropriate that when Spotify launches in Germany, a country well-known for its concerns about privacy, it should encounter problems in this area -- just as it was probably inevitable that soon after its arrival in the US, Spotify was sued for alleged patent infringement.

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Imagine a new hot-dog selling venture. Let’s also say there’s only one supplier to purchase hot dogs from. Instead of simply charging a fixed price for hot dogs, that supplier demands the HIGHER of the following: $1 per hot dog sold OR $2 for every customer served OR 50 percent of all revenues for anything sold in the store. In addition, the supplier requires a two-year minimum order of 300 hot dogs per day, payable all in advance. If fewer hot dogs are sold, there is no refund. If more than 300 hot dogs are sold each day, payments to the supplier are generated by calculating $2 per customer or 50 percent of total revenues, so an additional payment is due to the supplier. After the first two years, the supplier can unilaterally adjust any of the pricing terms and the shop can never switch suppliers.

When NBC removed its content from the iTunes store for about nine months in 2007 and 2008, there was an 11.4 percent increase in piracy, but no increase in NBC’s DVD sales — a loss of close to $20 million, given 23,000 lost sales per day at an average price of $3. And when ABC added its content to Hulu in July 2009, piracy dropped by 30 percent. Likewise, when a major book publisher stopped selling new Kindle titles on Amazon in 2010, there was no increase in hardcover sales, and when the Kindle titles were finally made available, their sales were 50 percent lower than they otherwise would have been.

The issue is that you then encounter the one thing worse than getting paid peanuts and that’s obscurity. People want to be entertained by music, not have to hunt things down. It has to be easy, which is why Spotify has gained so much traction. If you manage to get an average music fan’s attention on your band (out of the THREE THOUSAND others that released something that week) for 2 seconds and they look on Spotify and it’s not there, do you know what they do? They move on to another song. And you’ve lost your chance of gaining a fan. And the royalty. The number of people who would then spend time searching for alternative listening methods is miniscule.

While none of us have a crystal ball to see exactly which way the future of this business is going to turn, we have been actively embracing all possible legal outlets for our artists and their music. We have given away free album downloads by both Gama Bomb and Wormrot and like to think we keep an open mind on the latest ways people “consume” their music.

I do not believe for one minute the record industry is dying but evolving (as it always has) and it is up to us as record labels to find, develop and build careers for our artists utilizing our accumulative years of experience.

I think it is no coincidence that when Spotify launched here in the USA, we also had our best ever month of sales on iTunes. Spotify is just one of the many new ways that fans can find and listen to new music by our recording artists and should be seen as that and nothing more.”

The modern version of that is the wholesale commoditizing of music catalogs by the labels who create licensing deals with the streaming music services. Those actions in turn further homogenize the streaming music service systems as the services only have access to the same catalogs – there is no differentiation. Artists get pennies, or less than a penny, when someone streams their song, and the listener gets advertising in the stream unless they pay to escape the ads.

Music streaming on the web is not a Big Idea, it’s simply a lack of intellectual vision and thinking. Worse, it has advanced the “passive listening” experience. It’s just terrestrial radio dumped on to the web in other words – including advertising....

[....]

The bottom line is that there is no differentiation at the end of the day between Mog, Rdio, Spotify, Rhapsody, and all the others too numerous to mention, if they all have the same music catologs – widgets and tactics don’t count.

Unfortunately, you will not find our record in any record stores. The reason for this is because we do not have a record label, which means we have no access to distribution. Without a distributor, you cannot sell your CD’s in record stores. If you work for a distributor and you’re interested in carrying our CD or Vinyl, or both, feel free to contact us! 

If you choose to purchase our music or use one of the ‘legal’ streaming services, here’s an overview of where the pennies go. 

SPOTIFY:  With Spotify, we’ll get 0.003 EUR/play. 

If you listen to the album all the way through, we’ll get 0.029 EUR.

If you listen to the album 10 times on Spotify, we’ll get 0.29 EUR

If you listen to it a hundred times, we’ll get 2.94 EUR

If you listen to the album 1,000 times (once a day for 3 years!) we’ll get 29.47 EUR!

If you use the free version of Spotify, it won’t cost you anything. Spotify will make money from ads. If you use any of the paid versions, we have no idea how they carve up the money. They only disclose this information to the Major record labels...

DEEZER:

Deezer seems to pay a little more.

We’ve been getting 0.006 EUR/play from them. That’s 0.052 EUR/album play. If you listen to the album 10 times on Deezer, we’ll get 0.52 EUR. If you listen to it a hundred times, we’ll get 5.2 EUR. If you listen to the album 1,000 times (once a day for 3 years!) we’ll get a whopping 52 EUR! 

If you use the free version of Deezer, it won’t cost you anything and Deezer will make money from the ads. If you use any of the paid versions, we have no idea how they carve up the money either.

eMUSIC:

eMusic is a subscription service. The cost of the album will depend on the plan you have. We get roughly $0.29/song or $2.60/album (9 songs).

AMAZON MP3:

You’ll pay 7.11 EUR to download the MP3’s. We will get 4.97 EUR of that. That’s a 70-30 split.

iTUNES:

The album will cost you 8.91 EUR to buy from Apple.

There’s a 70-30% split there too, so we will keep 6.28 EUR/album.

That being said, it costs us 35 EUR/year to keep an album on iTunes, Spotify, and Amazon (105 EUR per year for all 3 of our albums!) so we don’t make any money until 24 people have bought a digital copy of the album on iTunes, or 150 single songs, or if we get tens of thousands of listens on Spotify! In most cases, it’s actually more economically viable not to sell the music at all.

But what about if you buy the Digital version directly from us?

DIGITAL:

We allow people to pay what they want for the digital version. If you choose to pay 5 EUR, Paypal takes 0.37 EUR, Bandcamp takes 0.75 EUR. Uniform Motion keeps 3.88 EUR. it doesn’t cost us anything to have a page on bandcamp

If you decide to pay nothing, well, we get nothing, but at least you didn’t give money indirectly to major record labels, which seems to be the case with Spotify!!

CD: 

If you buy a CD, directly from us for 10 EUR, Paypal takes 0.515 EUR, Bandcamp takes 1.5 EUR. So there’s slightly less than 8 EUR left for us. But hold on a second, it costs a fair bit to make the CD.

The CD itself costs 1.2 EUR, the booklet costs about 50 cents, the CD packaging is 1.8 EUR and the sticker on the front costs 35 cents.

That’s a total of 3.65 EUR

So in reality, there’s 4.34 EUR left for us.

VINYL: If you buy a 12” Vinyl from us at 15 EUR, Bandcamp takes 2.25 EUR, Paypal takes 0.646 EUR so there’s 12.10 left. The cost of the Vinyl itself is 3.06 EUR

The labels cost 1.3 EUR. For a total of 4.36 EUR

So there’s 7.75 EUR left for us.

However, we had to press 250 of these (because that’s the minimum order), so it’s very unlikely we’ll make any money on them.

We need to sell 72 copies before we break even on the vinyl edition. We’ve sold about 30 so far.

If we break even, we’ll lower the price a little bit. :)

a central memory device which is connected to a communications network and has a databank of digitized music information and, a terminal which is connected to the central memory device via the communications network, the central memory device being equipped with a retrieval module and the said modules having the capability to interact via the communications network in order to order and transmit selectively chosen music information, wherein the selectively chosen music information is organized with a defined format for transmission in a digital music information object, the format including a core and a number of additional layers, the core including at least one object identification code, object structure information, a consumer code and an encryption table and the one or more additional layers including the actual music information, wherein the central memory device has an encryption module for encryption of the music information object before transmission using the encryption table, and wherein the terminal has a decryption module for decryption of the music information object before its reproduction using the encryption table, an interpretation module for interpretation and reproduction conditioning of the music information object as well as an authorization device having identification information for identification of the terminal and of the consumer which is retrievable by the interpretation module and by the decryption module for authorization checking.

[Spotify] has eradicated music piracy almost on its own. Sweden was the home of Pirate Bay. They even had their own political party and made the prime minister in national television declare "Off (sic) course the youth shall be able to download music for free".

Three years later, The Pirate Bay is not mentioned by anyone anymore. Spotify is, on the other hand, mentioned by almost everyone - including the old Pirate bay fans.

This did not happen because some new radical law or brutal police force were implemented. Neither because a confused prime minister changed his mind again and embraced the music industry. It all happened simply because the users found a new legal service that they actually thought was much better than the old Piracy one.

Because streaming customers do not own their music, they cannot take it with them. Should they decide to try another service (or if a service goes under), users should be able to easily export titles of songs in playlists they created or a list of favorite music, etc. Users should also be able to choose independent add-ons that make the service more valuable, such as alternative means of organizing their music "collections." Without this kind of functionality, users are going to be disappointed, and we are unlikely to see the real competition that helps drive innovation.

In meetings in Los Angeles recently, Apple executives told their music industry counterparts that they had serious doubts about whether Spotify's business model could ever generate significant revenues or profits, according to two sources with knowledge of the discussions.

But Apple executives worried about the effects of a free music service might have on the rest of the market. They noted that it's tough to sell something that someone else is giving away, the sources said. One industry insider said it is only logical that if Spotify were allowed to launch a free-music service here, at a time when Nielsen recently reported that the growth of digital sales has flattened out, it could eat into the businesses of proven revenue-producers like Apple and Amazon.