Have they rejected it?  Have they approved it?  Since Spotify submitted its iPhone App application rumours and conspiracy theories have been rife.  All the talk and tweets have made me think about my relationship with Spotify and how it has adapted my music consumption habits… could this superhero application be starting to show a dark side…?

I got into an argument with a friend the other day over Spotify, confused as to why he continued to shun the programme.  His decisive response was, ‘I like to make sure artists are compensated for their work.’

Me too mate.

His outburst was probably due to a lack of knowledge about Spotify, assuming all things free (where music is involved) are illegal.  However it did make me wonder…

For those that don’t know Spotify is a legal music streaming/discovery site boasting millions of tracks and millions of users.  It generates revenue through advertising and premium subscriptions which is then used to pay the labels.

Labels are paid according to how much a song is listened to – the more your record is played, the more money your label receives.  Simple.  The key is that the amount of money paid out is based on the amount of money Spotify makes ¹; they make no money, the labels get no money.  All of a sudden my mate’s argument about ‘compensation’ becomes a very potent one.  By opting to use Spotify as opposed to buying CDs am in fact doing more harm than good?

The timing of Spotify’s launch was perfect because it launched just as the recession became a reality.  As bankers collected their bonuses everyone else was forced to tighten their wallets and think seriously about the money they spent.  I had to cut back on the CD buying.  Spotify’s arrival meant I could get my new music fix without the financial outlay and over time my music buying habits have changed.

The premise behind Spotify is great; providing a competitive alternative to illegal downloading.  However, there is the other side to the coin; what if loyal CD buyers like myself switch to Spotify?  In the last few months alone, Maxwell, Florence + The Machine, The Maccabees, Mos Def, Daniel Merriweather, Bombay Bicycle Club, Melanie Fiona (to name few)… have all lost sales as a result of my changing behaviour.

A quick survey around the office suggests I am not alone;

“I use Spotify, buy way less (I think three all year), download [illegally] less as well.  Long live Spotify!”

“I would say I buy less CDs.  But there is certain music that’s not on it [Spotify] that I still plan to buy”

“[My Partner] and I both use Spotify and he says that he downloads/buys less but that is not necessarily due to Spotify.”

And threw up some other issues;

“Maybe I download more as I find new music on Spotify so I can put it on my iPod.”

Long term, Spotify is the way forward.  It’s innovative, easy to use and more importantly it gives music lovers (and illegal downloaders) what they want.  Short term is less clear because the recession is proving deeper than expected and if the major labels (and the larger indies) are not kept happy things can turn sour very quickly.  Pandora recently suffered the wrath of draconian copyright laws and were forced to limit free users to 40 hours of music a month².

Artists must be adequately compensated for the work they do, however as deals are made with record labels directly the artists are increasingly being left in the dark.  As the digital revolution charges on and record labels catch-up (finally) artists on these labels are being left vulnerable (indeed as I was finishing this article more news came to light about how Spotify manages to keep labels happy, and it appears this may be at the expense of the artists – especially independent ones³).

Is Spotify a hero or a villain – the jury is still out.  All I do know is it’s a great bit of software… but Mr. Ek [Spotify’s founder] you need to make some serious revenue (and I have to get my backside back into HMV).

Soulside Funk

References / Further Reading

¹ Ek is on a mission to pry music from the pirates (http://bit.ly/19bee6)

² Pandora Blog – Important Update on Royalties (http://bit.ly/bDCQI)

³ Behind the music: The real reason why the major labels love Spotify (http://bit.ly/4nzZeH)