Spotify – Record Label’s Dream Come True


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Music piracy is no longer an issue thanks to streaming; let the Spotify music executives tell it. They are almost of the belief that they single-handedly eliminated the issue of music piracy by providing their digital content streaming subscription service to the masses. According to Spotify’s Director Economics, Spotify’s streaming service has accounted for one out of every ten dollars earned by the major record labels this first quarter, compared to a similar result for the entire 2014 year. That’s 10% of the record label’s revenue coming from one source – Spotify.


So people aren’t illegally downloading anymore, instead they’re paying for paid subscriptions to services such as Spotify, that legally license digital records from the major music labels and publishers (or other content owners) for a licensing fee. So great! Now, music lovers can listen to virtually whatever they want to listen to, whenever they want to listen to it, and all they have to do is pay a small monthly subscription fee to an entity that has absolutely nothing to do with the creation of the music. Spotify is not composed of personal managers, songwriters, artists or other music creators. It is made up of business moguls who saw yet another opportunity to take advantage of the underdogs - the musicians. Spotify made its mark as a company functioning with the purpose of putting money back in the hands of the people who make the music because they were being cheated for so many years. But how much more money are the artist’s really seeing? Anymore than they were seeing when Napster was around? I’m inclined to say, not really. At least with Napster and such, no one was getting paid. Now with Spotify, the wrong people are getting paid and at the expense of the artist.


Spotify is really a record label’s dream come true, maybe because it really amounts to being a digital record label in and of itself. It recaptured label revenues that were once lost to services such as Napster and Limewire and it created a platform for music listeners to gain access to all types of music without actually having to purchase it. Spotify does not make direct payouts to artists and/or songwriters in the same way that performance rights organizations such as ASCAP/BMI/SESAC or SoundExchange do. Instead Spotify pays the record labels for the use of the music for it to be distributed by the terms of the artist’s recording agreement with the label, and we all know what an artist’s record label agreement looks like – a basic “how can I screw you, let me count the ways” document. Those tricky little record label executives have likely drafted an agreement that separates digital licensing fees from royalties owed to artists by record sales. I mean technically, streaming music, means you never bought the music because you never own it. What you’re actually purchasing with these subscription services is access to the music, to listen to it whenever you please. You can’t save it; you can’t send it to someone else; you can’t put it in your car CD player…but you can listen to it whenever you have a phone, tablet or computer and Internet access. That’s not too shabby. But let’s be clear, you’re not buying the music, just access to it. And if you’re not purchasing the music, you are not generating royalties that will be payable to the artist. Simple as that.


So while Spotify can brag and boast that its numbers are generating large amounts of revenue contributing to the music business as a whole, and while the record labels can be excited that they’re making up for lost times with the advent of Spotify, our musicians (the actual content creators) remain in the same predicament they’ve been in since the beginning of time. They make the music and everyone around them makes the money. Does anyone else see anything wrong with this picture?

For questions concerning this article please contact lerae@askmusiclawyer.com

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