by Mike Masnick

Filed Under:
business models, labels, music, platforms


How Labels Pulling Out Of Spotify Are Doing Massive Harm To Themselves

from the are-they-that-clueless? dept

Just a couple months ago, we pointed out how labels dropping out of Spotify were totally missing the point. A few labels had argued that Spotify only pays a tiny amount per stream, and that was somehow cutting into sales revenue. However, two recent stories we wrote about highlight how this is becoming an even more braindead move than before. And yet, the trend continues. Just recently there were stories about over 200 labels being pulled off Spotify by distributor STHoldings, who gave the usual song and dance about not cannibalizing revenue.

Here's why that's dumb. First, as we saw in the recent study about piracy, taking content away from where people want it doesn't lead to increased sales. As the professors who did the report explained:
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.
Making your content available on these platforms drives sales elsewhere. Keeping them off does the opposite. It actually hurts sales.

Add to that the release of the new platform for developers. That means that soon there will be a ton of ways to build additional revenue opportunities on top of Spotify. It'll be easy to buy concert tickets. Or merchandise. Or collectable items. Or pretty much anything you want... directly through the Spotify music player itself. But if the bands aren't there, then people will simply ignore or forget about those acts... and they'll find others via Spotify.

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  1. icon
    PaulT (profile), 4 Dec 2011 @ 9:53am

    Re: Re: Re:

    "What I mean by scale, is in it's current state, spotify offers fractions of a penny per play, so even someone with hundreds of millions of plays still sees a fraction of what would potentially come from a modest amount of sales in comparison."

    OK, but this is only relevant if you assume that Spotify replaces sales. If you view it as an addendum, that is as a replacement for radio (where labels regularly pay the labels to play their music), then the amounts are an additional income, not a loss. It's only a problem if you assume that everybody who listens to Spotify does so instead of buying higher value products, which is yet to be shown by any credible source.

    "For many, it's still worth the gamble that people will actually pay for music, while also have some get get pirated, and still see more money than being on spotify."

    But, if that gamble loses out, those morons don't get to whine about piracy when they locked out a section of the market from legal supply.

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