What Cracker's David Lowery gets right (and wrong) about Spotify and Taylor Swift
David Lowery, whose band Cracker scored a hit in 1993 with "Low," is one of the loudest and most eloquent critics of the new streaming music economy. His blog post, "My Song Got Played On Pandora 1 Million Times and All I Got Was $16.89," became the definitive example of unfair artist compensation in the 21st century. (The actual royalty payment was around $42, but he split it with his bandmates).
Now, Lowery has written a new post in which he imagines that he's been appointed CEO of Spotify to "fix" the service in the wake of Taylor Swift's decision to remove all of her music. His prescription makes sense: Spotify should make "premium" content like Swift's newest album only available to the services' paid users, which make up around 25 percent of its total user base and who don't have to suffer through ads like the freeloading listeners. Lowery then goes even further to suggest that Spotify's free version should be transitioned into a free 30-day trial like Netflix.
I understand why Lowery wants more people to pay for Spotify -- subscribers who drop $9.99 a month on streaming services like Spotify create far more revenue for the US music industry than the tens of millions more users who opt for the free ad-supported version. There may be a day when marketers develop more sophisticated advertising properties around music that can drive more significant revenues -- and, to be sure, music streaming services are betting on that. But for now, the revenue created by the relatively small number of paying users is almost triple the revenue created by free ad-supported listens on streaming services.
But converting users into paying customers is easier said than done. To justify this phase-out of Spotify's free service, Lowery invokes Netflix which has always charged users a subscription fee after the first 30 days. But comparing purchase patterns of Spotify users to Netflix users is not so simple. As industry analyst Bob Lefsetz recently noted, consumers are accustomed to paying for access over ownership when it comes to film. From cable TV subscriptions to the massive popularity of VHS and DVD rentals, Americans have always been willing to drop cash for access to a film or television show, even if the user doesn't get to keep it forever. That's why the Netflix model works.
But music is different. Historically, when a consumer paid real money for music, that meant ownership, not just access -- that vinyl record or cassette tape or CD was yours forever, or at least until it became damaged beyond recognition. As for access to non-owned music, that always came for free, via terrestrial radio. It's simply not in Americans' blood to pay for music they don't own. Never mind the fact that a $9.99 Spotify subscription, which with few exceptions grants users access to nearly anything they'd ever want to hear, is arguably an even better deal than an $8.99 Netflix subscription, which offers an incomplete and constantly-changing film catalog. The idea of convincing Spotify's 50 million users to pay for the service may be a pipe dream.
That said, Lowery is right that offering premium content like the new Swift album to paying subscribers could help boost the radio of paid-to-free Spotify users, which has held steady at 25 percent even as the service continues to grow. That would be good news not just for Swift, but for any other artist those paid users listens to -- a stream from a paid user generates ten times the royalty as a stream from a non-paid user.
Spotify may need to adopt a system like that if it wants to compete with Apple's (and now YouTube's) upcoming streaming music services. Apple and YouTube already have strong connections within the music industry. And Apple in particular offers artists something Spotify cannot -- a revenue stream for digital downloads. Imagine if Swift had struck an exclusive streaming deal with Apple wherein for the first two weeks, her latest album 1989 would only be available to download. After that two week period, during which Swift is likely to sell the vast majority of her albums anyway, she makes 1989 available to stream, but only through Apple's streaming service. If Apple could convince the world's biggest artists, like Swift, Beyonce, and Katy Perry, to go along with such deals, it could easily destroy Spotify.
Artists deserve to be paid, and despite what some have written it isn't an artist's responsibility to figure out the business model for services like Spotify. Furthermore, if an artist has the popularity and control to dictate the terms of her own distribution, then we should celebrate her exercising that control, not shame her.
If Spotify would agree to a tiered, freemium service not unlike Hulu, then it could possibly retain the repertoires of its biggest artists without alienating its freeloading users. And with so many competitors from huge public companies waiting in the wing, it can't afford to lose too many more artists like Swift.
[illustration by Brad Jonas]