Spotify as the industry's savior? Century Media doesn't think so
Spotify waited more than a year to come to the U.S. market. Metal label Century Media, which has its U.S. headquarters in Los Angeles, waited about a month to pull its content from the ad-supported streaming service.
In a detailed post, Century noted that CD and vinyl "sales are dropping drastically in all countries where Spotify is active." Don Robertson, Century Media Records North American president, is on site today at the Warped Tour, but responded to questions via email. Although Robertson didn't break out his responses to each Pop & Hiss inquiry, he was asked whether the label, which has a greater presence in Europe, had seen a specific drop-off in sales overseas before making the decision to remove its content.
"Certainly, overseas statistics influenced this choice, but it was not the only factor," Robertson wrote. "Although we whole-heartedly recognize Spotify as a new and exciting avenue for fans to gain access to music, in its current form, it does not allow for the artists on the Century Media roster and its affiliated labels to derive the profit needed to sustain their respective careers ... and it would appear to hurt both new music and catalog sales equally."
Spotify today responded to Century's decision to leave the service.
"We are sorry that Century Media have opted not to offer its music to their fans through Spotify," read a statement from the company. "Spotify was launched out of a desire to develop a better, more convenient and legal alternative to music piracy. Spotify now monetises an audience the large majority of whom were downloading illegally (and therefore not making any money for the industry) before Spotify was available."
While neither Robertson's comment nor Century Media's published statement offers any hard numbers as evidence, the question as to whether or not ad-supported streaming services could support a label's business has long been a concern for the industry. It's not news that streaming services have long been targeted for giving labels relatively small payouts.
Brian Brandt, who runs the classical- and jazz-focused label Mode Records, today posted an essay on NewMusicBox.org, which was subsequently picked up by Billboard Magazine. Brandt posted some Spotify figures from June: "A big individual seller that month, by composer Luciano Berio, was streamed 1,326 times through Spotify; our income $4.18. So, we earn about 1/3 of a penny per stream. And these meager amounts should be split with the artists and composers."
Still, Spotify noted that the company has become a rather sizable business.
"Spotify," continued the company in its statement, "is now generating serious revenues for rights holders; since our launch just three years ago, we have paid over $100 million to labels and publishers, who, in turn, pass this on to the artists, composers and authors they represent. Indeed, a top Swedish music executive was recently quoted as saying that Spotify is currently the biggest single revenue source for the music industry in Scandinavia."
Spotify is betting on a tiered plan to offer a sustainable business model. For $4.99 a month, users can listen without ads; for $9.99 a month, users will have access to music from a smart phone such as an iPhone, Android, Palm or Windows 7 device.
Spotify has apparently made a believer out of some industry heaver-hitters. Warner Music Group Chairman Edgar Bronfman slammed streaming services in 2010, noting that they "are clearly not a net positive for the industry." Yet earlier this year, he said: "We do see Spotify and streaming revenue from services other than Spotify to be meaningful in 2011." Spotify secured licensing agreements with all four majors before launching in the U.S.
Spotify can boast more than 15 million tracks in its library, and while the company doesn't officially release numbers regarding users, it's accepted that Spotify has more than 1.4 million free users and around 175,000 paying customers in the U.S. The service launched on these shores last month.
Century clearly isn't impressed. The company's statement: "Physical sales are dropping drastically in all countries where Spotify is active. Artists are depending on their income from selling music and it is our job to support them to do so. Since the artists need to sell their music to continue their creativity, Spotify is a problem for them. This is about survival, nothing less and it is time that fans and consumers realize that for artists it is essential to sell music to keep their heads above water."
Century did not go so far as to write off Spotify. Robertson characterized the service as a "promotional" tool in his email. In the label's statement, the door to continue working with Spotify was left open, albeit in a limited capacity.
"At the same time Century Media also believes that Spotify is a great tool to discover new music and is in the process of reintroducing their bands to Spotify by way of putting up samplers of the artists," the company's statement said. "This way, fans can still discover the great music released by the label."
Pundits have long pointed to streaming as the future of music, and the hope is that once the services are widely available, the larger scale will make them financially viable. Simon Wheeler, who oversees digital efforts for the indie label consortium the Beggars Group, said as much at this year's South by Southwest Festival & Conference in Austin, Texas.
"It is already our second- or third-biggest digital account, globally," said Wheeler. "We’re seeing as many as 200 times [more music] consumption on streaming services. If you scale that across multiple territories, I’m optimistic that the business is there."
-- Todd Martens
Images: Company logos for Century Media and Spotify.