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. identicon
    gaetano, 5 Dec 2011 @ 6:26am

    Re: Re: Re: Re: Re: Re:

    Paul, again, all great points.

    To me, it's really the lack of transparency within Spotify itself (you still can't find any real numbers anywhere regarding how they calculate royalties, and when you do they're many times subjective or dated). Aside from that, seeing them team up with corporate giants (both labels, social media and media outlets) It's eerily familiar to greedy, vague old model tactics, and just points backwards in my opinion.

    In some ways, it's creating the perfect storm, however, to me it seems that this type of consumption removes the fan even further from the artists in many ways. Is it true that many people with go and purchase after hearing something? Sure, but I believe this is the exception, not the rule.

    As far as a music discovery tool, there are scores out there, and the numbers are showing that terrestrial radio is still the most trusted discovery vehicle. After that it's social networking, but the catalyst for that most times is another "trusted" source such as a blog or form of online media.

    In turn, Spotify is more of a search engine and on demand player, rather than an actual discovery tool.

    I'll be honest, I love Spotify on paper. I use it for reference as I would youtube in the past. But in many ways if it was to scale, and they were to have their "music like water" perfect world, it would look more like the past than the future....

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