Is Spotify putting indie musicians out of business?

Some say Spotify is a viable option to piracy, others say it is part of a culture of devaluation

Spotify launched in the U.S. last July and quickly became the most popular online streaming music service in the country. Along with competitiors Pandora, MOG, and Deezer, Spotify makes vast catalogs of recorded material convenient to the public, and in some cases, totally free.

But does the ease with which such companies serve up music devalue the music itself? In short, are services like Spotify economically fair to musicians, especially those who find themselves outside the mainstream?

Online music - a double-edged sword for musicians

The question of how the digitization of music affects recording artists is not an easy one to answer. There are both and good and bad aspects of the ready availabilty of online content, where musicians are concerned.

On one hand, more people than ever are getting to find the music they want to hear, which is good for musicians who want to get the word out, and especially good for music fans. On the other hand, this breaking down of barriers is also a breaking down of the "turnstiles" by which musicians make their living, i.e. the retail counters where music was sold in the pre-digital era.

The International Federation of Phonographic Industry, an organization that represents the interests of worldwide producers of recorded music, recently released their annual report. This report reflected the unresolved dichotomy by which today's digital music scene can be characterized -- ready availability vs. steady devaluation -- as well as a gradual shift in public opinion toward the regulation of online content, in an effort to save a music industry in crisis.

"The key statistics of this report sum up the story of recent years," reads said report. "On one hand, spectacular growth in digital revenues, up more than 1000 per cent in seven years; but on the other hand, the loss of nearly one-third of the value of the entire recorded music industry. While record companies are innovating and licensing every viable form of music access for consumers, the music industry is still haemorrhaging revenue as a result of digital piracy."

The first comprehensive government study on music piracy, conducted in March of 2010, predicts that over one million jobs in the European creative industry will be lost by 2015.

Is Spotify any fairer to independent musicians than piracy?

So where does Spotify lie on the spectrum between the positive and negative aspects of digital music's ready availability? Has it repositioned the proverbial turnstile with its freemium business model, or is it just another digital pirate?

While Spotify does not release the specifics of their business dealings with record companies, some reports have emerged regarding how payment to recording artists stacks up against non-digital models. And by most accounts, Spotify pays independent artists only fractions of a penny per play.

U.K. indie-folk band Uniform Motion laid out in detail what they get paid by Spotify vs. the non-digital sales in a blog post, and the results are striking. The band makes approximately $0.0041 per song play and $0.04 per album play on Spotify. Compare this to the sale of the CD format of their album, which costs $14 per copy, of which the band sees $5.99 in net profit.

One independent L.A.-based heavy metal label, Prosthetic, have pulled their catalog from Spotify's listings. "There [does] not appear to be an upside," says label co-owner E.J. Johantgen to L.A. Weekly.

Another CA-based heavy metal label Century Media also pulled their catalogue from Spotify. "While everyone at the label group believes in the ever changing possibilities of new technology and new ways of bringing music to the fans, Century Media is also of the opinion that Spotify in its present shape and form isn’t the way forward," said Century Media, via an August press release.

"Spotify will kill smaller bands that are already struggling to make ends meet," said Century Media.

Vator News contacted Spotify, which made a statement arguing that their company offers promotion for independent artists like to that of radio play, as well as offer a viable option to piracy.

"Spotify does not sell streams, but access to music. Users pay for this access either via a subscription fee or with their ear time via the ad-supported service [just like commercial radio] – they do not pay per stream," said Spotify.

"In other words, Spotify is not a unit based business and it does not make sense to look at revenues from Spotify from a per stream or other music unit-based point of view. Instead, one must look at the overall revenues that Spotify is generating, and how these revenues grow over time."

Vator News contacted Frank Portman, lead-singer of Bay Area punk band the Mr. T Experience and best-selling author of YA novel King Dork. When asked about Spotify, and its effects on indie recording artists, Portman said:

"I wouldn't say I have an anti-Spotify stance. I think it's cool, and it's the best and most functional thing of its kind yet seen. However, as the best, most efficient delivery system for free or so-cheap-it-might-as-well-be-free music, it is a kind of flagship sailing down the general current of devaluing songs and sound recordings of them.

"It's not Spotify's fault that it is able to do what it does;  it's not the users' fault that it works for them to use it. It is a reasonable arrangement that accurately reflects the reality of the true value of "content" these days, which is just about nearly zero.

"But the fact that you can't sell music anymore in any real sense does affect the ability of people like me to fund recordings. I think this situation, where sound recordings and the songs they are recordings of are nearly valueless, is regrettable, but the toothpaste can't be put back in the tube. Spotify could disappear and it wouldn't change the situation.  It is what it is."