Bono: Don’t blame Spotify

First Jimmy Buffett asked Spotify founder Daniel Ek for “a raise.” Then Taylor Swift pulled all her music from the music-streaming service.

Now Bono is riding to Spotify’s defense. “The real enemy is not between digital downloads or streaming. The real fight is between opacity and transparency,” the U2 frontman said at the Web Summit in Dublin, Ireland, the annual technology event that has attracted 20,000 people this year.

“The music business has historically involved itself in quite considerable deceit,” Bono said late Thursday.

Artists and songwriters have complained that income from streaming services is trivial compared to income from CD sales or from iTunes and other download services. Royalty contracts are complicated and vary widely, but it’s typical for a musician to receive a fraction of a penny each time a song is streamed. Beyonce, Coldplay and the Black Keys are among the artists who have withheld their music from Spotify.

A half-cent payment would mean a million streams is worth $5,000. That’s left many artists, including British pop singer Ed Sheeran, to see streaming services as more of a discovery service than an income generator.

“It really helps an album get out there because you just stick it on like a playlist and leave it on, rather than cherry-pick certain songs on iTunes,” Sheeran told Sky News this week. Turning even a small portion of a larger audience into super fans who pay for concerts and merchandise is still a win in the end, he said.

Hugely popular artists, like Swift, make millions of dollars from CDs and downloads, so the decision to stream their music is more about marketing and image-making, traded off against lost sales of CDs and downloads.

According to Chris Castle, a music lawyer in Austin, Texas, Swift has all the leverage. Her new record “1989” sold nearly 1.3 million copies this week, the biggest sales week for any album since 2002, according to Nielsen SoundScan. “Spotify needs hits and hits don’t need Spotify. It’s as simple as that,” he said.

In a survey last summer, digital music industry analyst Mark Mulligan said that 23% of music streamers have stopped their habit of buying an album a month and that streaming’s effect is even worse on paid downloads of music online.

But many listeners argue that if the music’s not on Spotify, they would pirate the music instead, or choose not to listen to it at all.

Some say streaming makes most sense early in artists’ careers, when they need publicity, and late in their careers, when their hits become oldies. But even that approach could easily change with CD sales in free fall, download sales declining and streaming services growing strong.

Mulligan said this week that streaming services would benefit from increasing prices and varying tiers because super fans who once spent $30 a month on music are now subscribers of Spotify’s $10-a-month plan while those who spent $10 a month now stream for free.

His argument falls in line with recent data from audience measurement service Nielsen that showed that those who pay for streaming services are about twice as likely to buy a CD or download an album than those who freeload on advertising-supported outlets.

Spotify said in May that it hit 10 million paying premium members and has 40 million total active users in more than 50 countries worldwide.

Bono, however, was talking more about how money gets from Spotify to rights holders than about the payment itself. By “opacity,” he was referring to the smokescreen that artists and rights holders encounter in trying to determine the royalties they are owed when their works are played or performed.

Music industry conduits for those royalties keep information hidden or hard to find, so rights holders don’t know whether they’re being shortchanged. Some can afford investigators or lawyers; others simply must live with the check they get in the mail.

Spotify offers a dashboard for musicians, songwriters and others to see where and in what volume their works are being streamed, and how much Spotify is paying, even though those payments typically go through a complex web of global intermediaries.

“For a big hit today, there are about 700,000 royalty streams, just for one song,” Willard Ahdritz said at the conference. He is chief executive of Kobalt Music Group, a record label and music publishing company that also helps rights holders get paid.

The issues go beyond transparency. Singer-songwriter Swift said: “It’s my opinion that music should not be free” and that “valuable things should be paid for.”

She didn’t address specific issues with Spotify.

Swift and her record label, Big Machine, take issue with Spotify’s two-tier system, according to the Financial Times, citing a person
familiar with the matter. Spotify has a free service that limits the number of songs that can be streamed and an unlimited version for $9.99 a month.

Spotify requires artists to put their works on both, the paper said. Swift’s team argued that the free service reduces Spotify’s revenue, and hence the amount of royalties it’s able to pay.

Wenda Harris Millard, chief operating officer of the digital media consulting firm MediaLink, said that Swift’s action this week could finally lead to a resolution in the long-running fight over music on the Web.

“It’s jolted the artists, their representatives,” she said in an interview. “This could bring everyone to the table, and maybe it finally gets resolved.”

Consulting firm Bain & Co. noted in a research paper Friday that the record labels and other entertainment giants must realize that as a growing of share media consumption shifts to less affluent markets, they will need “to look beyond their traditional advertising and consumer-pay models to new opportunities that make better use of the data exhaust, the byproduct of digital transactions.”