— Marketing (&) Mischief

Now that Apple #failed to launch anything remarkable on Nov 16th (oh come on…The Beatles?) it felt like a good time to write something more about the guys that truly are doing something to revolutionize the way we consume music. My old friend and favorite music service of them all - Spotify.

I know they’ve been around for seems like ages in Internet Time and that they have not really released anything spectacular since the mobile apps and the Facebook integration but what they are doing (at least if you take their, or better yet Jonathan’s, word for it) is showing the music industry that there actually is money to be made using their freemium model. Not just for Spotify and the labels but also for the artists.

In case you don’t pay attention to music industry news there has been a “bit” of a backlash from the artists towards Spotify. When they first launched pretty much everyone screamed to get on board (both users and artists) but when the first royalties were paid quite a few artists (Lady Gaga being the most famous globally, Mokoma here in Finland) were shocked to find out that even if their songs had been played hundreds of thousands or millions of times on the new service their share of the revenue was in the tens or hundreds of euros (or dollars in Gaga’s case). Not good. Not good at all.

So what’s the beef? Why am I writing this? Read on, dear friends…

Jonathan from Spotify (LOL) shared some of their latest data at the Musiikki & Media festival/event in Tampere, Finland a few weeks back. Among the not so surprising curves of exponential growth there were some facts & figures that caught my interest and hopefully the interest of a lot of the doubters as well.

Consider this, naysayers:

1. Growing pains the reason for the ridiculously small royalties

Spotify is giving 70% of their revenues back to labels and artists. During the first 6months / year (the time period from which the first royalties were paid) they had 1 million users. Now they have 10 million users and have credited more that 30 million euros back to the labels and artists. They also are the most important source of digital sales revenue for most major labels in Sweden – the country where they are from and were they have the most users.

I also had the chance to chat with Kimmo Laiho (or Elastinen) from the Finnish label Rähinä Records. He supported Jonathan’s figures by stating that their artists are actually seeing real, substantial revenue from Spotify plays already now.

Sounds better, right?

2. 6% of the listening on Spotify is TOP50 and 94% is catalogue

This means Spotify is being used MAINLY to find new music. It’s a discovery engine geared for mining the long tail. Should be good for anyone making music. Well maybe not Metallica. But honestly – why should they care anymore in their private jets. Stop whining.

3. Fighting piracy. And having a real impact.

Spotify users have pretty much totally stopped pirating music (according to 3rd party research). This has to be good for anyone in the music biz. No denying that. They’ve actually done more than any government or other anti-piracy scheme. Give the people an easier and simpler way to get what they want and they’ll go for it. And in the process slowly try and teach people that they should actually start paying for their music again. It’s a tricky job but Spotify is already doing it. Respect.

4. Helping artists understand their audience and make more money

One of the most interesting things Jonathan revealed was the statistics interface that Spotify will be opening more to the artists in the future. Basically Spotify knows where and who your listeners are and when they listen to you. That information is invaluable in a world where artists have to turn to other means of revenue than album sales for their livelihood. Just as an example imagine how that data can impact gig sales…

5. The Freemium Model works

Spotify has seen that the longer you use the service as “free” or ad-paid the more likely you will be hooked and will convert to a Premium paying member. Again: Teaching people to pay for music. This is good for the labels and artists and also an interesting bit of data for anyone who is building a cloud-based service and is wondering what revenue model to go for.

So…the beef? Or my beef at least :)

My point with all this (being the unrelenting optimist I am) is to try and convince the doubters within the music industry that we have NO CHOICE but to embrace the likes of Spotify as the way of the new wild wild west – their model IS our best shot at fighting piracy and making money off of the music we so love. Only then can we free ourselves to focus on finding new revenue streams that will make it possible for artists to make music that their fans don’t realize they have to pay for (Ironic isn’t it).

So stop whining and fighting a battle you can not win. Embrace the change and follow Spotify’s lead by focusing your energy on something that will make a real difference.

p.s. Check out Jonathan’s presentation below for more details!

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