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SXSW 2012: Sean Parker predicts a 'war' between labels, artists

March 14, 2012 |  3:24 pm

Spotify
Late Tuesday in Austin, Texas, two outdoor stages at the annual festival and conference that is South by Southwest were being erected in an empty lot. Around the corner, a twentysomething-looking gentleman was hawking a dog. “Healthy dog, $12,” he said. The canine peddler received little more than quizzical looks. It’s almost as if he were trying to convine the music industry that there’s money to be made in online streaming services.

The cash, however, is very real, according to Napster co-founder Sean Parker, who spoke at a SXSW panel. While pledging an allegiance to neutrality, Parker essentially sounded the sirens of battle and predicted a bout between labels and artists.

“There’s blood in the water,” said Parker, who has invested in Spotify and sits on the company’s board. He vowed that the service, which entices users to sign up for subscriptions after utilizing a free, ad-supported version, will soon become one of the biggest sources of income for labels.

PHOTOS: South by Southwest

“Spotify is returning a huge amount of money. We’ll overtake iTunes in terms of what we bring to the record industry in under two years,” Parker said.

Meanwhile, major artists such as Coldplay, the Black Keys and Paul McCartney have opted out of some of the streaming services. Parker said Spotify must remain “neutral." If artists aren’t seeing cash from the service, he said, it's due to outdated label contracts.

“There’s definitely some sort of dissent brewing between labels, publishing companies and artists,” Parker said. “A lot of it has to do with older licensing schemes. There’s a lot of artists whose contracts are written in such a way that they do not get paid for what’s happening on streaming services.”

The revelation came near the end of an hour-plus conversation with Parker and his Napster partner Shawn Fanning. Much of the Q&A, conducted by Alex Winter, who is directing a documentary on the two, focused on the pair’s rebellious nature and hacking background. As Winter said, the two seem to delight in “disruptive technologies.”

The panel started with a short clip from the film, which ended with a voice-over stating that Fanning and Parker “revolutionized an industry that they knew nothing about.” If anything, the discussion revealed that the music business is still recovering from Napster, which opened up the record collections of all its users to be freely shared.

Parker was on the offensive for much of the talk. He criticized iTunes for being too slow, referred to the music business executives he met with during his time at Napster as “dinosaurs,” argued that Napster was essentially pitching the Spotify model to unreceptive ears, and remarked that Napster’s own lawyers were “idiots.” He said that even today, “great ignorance" pervades the music business and that he wasn’t taken seriously until he walked into label offices as a millionaire.

He said the early success of Spotify, which boasts about 3 million subscribers worldwide, is evidence of his theory that consumers will ultimately demand music on computers be free or nearly free. “Mobility and access is monetizable,” Parker said. “Music on the desktop is going to be free.”

“They're such outsiders, a dark horse player,” Parker said of Spotify. “No one expected that the solution to these problems would be worked out by a couple of guys in Sweden.”

The new business model, however, still has a way to go berfore it convinces all parts of the music business of its wonders.

“There’s a war coming, and they’re going to have to deal with it,” Parker said of label and artist relations. “Spotify has to remain neutral.”

ALSO:

SXSW 2012: Rdio gets new look, needs subscribers

SXSW 2012: Bear in Heaven, Light Asylum among early standouts 

SXSW 2012: The return of Fiona Apple, and other moments to watch

--  Todd Martens, from Austin, Texas

Image: The Spotify logo.

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