Spotify Is No Panacea

I am a Spotify junkie. From Death Cab for Cutie to Elliott Smith, I listen to almost all of my music through the free online streaming service to the point that it has made my iTunes completely defunct.

When I first got a Spotify account last year, I was partly attracted to the site’s claims that it was the panacea of the struggling music industry. Like “the Netflix of audio,” as Stephen Marks in the Pomona College economics department wrote to me, Spotify’s business model is predicated on its “all-you-can-stream service.” Listeners get access to a near infinite number of free songs available for streaming with intermittent ads that make up most of Spotify’s revenue. For $10 a month, Spotify Premium users can remove ads and download music when an Internet connection is not available.

Although the corporation is barely five years old, it has already found its niche within the online music industry. Spotify doubled its revenue from 2011 to 2012, garnering nearly $500 million in the process. The company operates in the hope of decreasing rampant online music piracy by offering free music to customers while simultaneously paying artists and record companies.

The inequity of Spotify’s business first struck me when my favorite band, the Black Keys, made the bold decision to boycott the service altogether with claims that the service is unfair for artists. While a wonderful deal for consumers, Spotify is actually doing more harm than good for artists and their intellectual property. Artists’ royalties are no longer just a percentage of the sale price as they are on iTunes, but instead they are calculated on a per-listen basis for each song. Spotify pays a pathetic 0.5 to 0.7 cents each time a song is streamed. For the vast majority of artists who haven’t made it big and don’t have millions of fans listening to their music, Spotify can be devastating. A million streams a year at 0.5 cents a stream gives an artist a measly $5,000. So as long as Spotify pays artists so little money for each stream, it makes surviving off of online music sales virtually impossible.

Spotify steals customers from iTunes and other traditional music services, which acts as a double-edged sword for artists. Instead of the stable and predictable income for an artist that results from a purchase, artists have to rely more and more on the unpredictable and minuscule payments that come from Spotify. At 0.5 cents a song, a song would have to be streamed 140 times to equal the royalties of just one 99-cent purchase on iTunes.

As a generation, we have reached a dichotomy in which we want free music but also want to respect the rights of artists who create our favorite music. Paying for music just seems foreign to a generation accustomed to pirated MP3s, even when we recognize the harm that has been done to artists. At least for the time being, there is no way to satisfy both of these conditions.

While Spotify is part of the problem, it holds glimpses of what the future of the music industry can and should look like. The idea of a streaming service that pays artists on a per-listen basis could be used if properly managed. As artists such as Coldplay and the Black Keys have voiced publicly, Spotify has too few paying subscribers to make up for the millions more who use the service for free.

Perhaps Spotify needs to become more like Netflix and charge a monthly membership fee. I wonder what would happen if Spotify simply began charging users a meager $3 per month in order to compensate artists properly. After an initial uproar, I’m willing to bet that a significant portion of free users would cough up the money.

Despite its faults, it is important to recognize that Spotify is still much better for the music industry and artists than is pirated music. Of course, at least they are receiving some money. But for the vast majority of artists, Spotify is no way to subsist. While Spotify may be better than all the alternatives for people who are unwilling to pay for music for the time being, it is far from a cure for the woes of the music industry. Let’s recognize Spotify not as an end but as a means to the end of rampant online piracy.