In Defence of Spotify and the Creator Economy
The theme of this newsletter is on an article I recently read on Rolling Stone titled “The Rosy ‘Creator Economy’ is Music’s Biggest Lie” (link at the bottom).
I think it’s time for me to come off the fence and stick up for Spotify. I’ve read countless attacks on their morals as a business with most of the conclusions drawn being ‘pay more per stream’, which to me misses the whole point. Onto this first.
Spotify’s Defence
Prior to the streaming era, major records had mostly monopolised the monetisation of music and defined the business model around it, mostly to their advantage. Artists that managed to get signed were (and perhaps still are) on a deal that favours the label heavily and the majority of those sat (and sit) in debt, paying down their advance painfully slowly by the small percentage of royalties their contract says they are owed. There was no incentive for anyone to change the system, the record labels and publishers were doing great business. Unfortunately for them, and actually some of the artists too, the internet did to the music industry what it would do to many other industries after it, pulled its business model to pieces.
Rather than the classical economic idea of ‘barriers to entry’, where new entrants into a market have hurdles to overcome, do established players need to think about barriers to entropy? What stops your market breaking apart under your feet?’
Zoe Scaman (@ zoe scaman)
As the traditional album/CD model fell apart the music industry simply grabbed tighter onto the revenues that remained, closing their eyes and hoping when they opened them again HMV still had a line around the block.
I’m sure there are those with a much greater knowledge of the exact details of what unfolded but to me, anyone that fought as hard as Spotify to do the deals, built the tech and got their app on the devices of 356m music fans deserves some credit. The big disparity (and challenge) was the change from an album of around 10-15 songs costing the same as a month's subscription. This, I would argue, is not Spotify’s doing.
Willingness to pay, especially during an era of piracy, was always going to be a challenge and Spotify are one of the only players in this market who are actually counting on this revenue to run their business. If they thought there was a tolerance to pay more, they would almost certainly attempt it.
This is where my first point ends. Is Spotify perfect? Almost certainly not. Do they deserve our gratitude and support for what they have built? I would argue yes.
From here the best way forward is to work with Spotify to expand their opportunities and give them a route to pass on even more than the 70%-80% cost of revenue they mostly give straight to artists, labels and publishers.
Music’s Place In The Creator Economy
Now I have excused Spotify of any wrongdoing (of course I am joking), it’s time to move onto music’s place in the creator economy and more specifically the recent Rolling Stone article.
Spotify’s site informs us that just 13,400 artists (0.2 percent) generated $50,000 or above on the streaming platform last year. Of that group, 7,800 generated over $100,000; 1,820 generated over $500,000; just 870 artists made above $1 million. - Tim Ingham, Rolling Stone
My biggest issue with this article is that it directly conflates a musician as part of the creator economy and Spotify, specifically, not paying enough per stream. One of the main tenets of the creator economy, as I’ve covered here, is that it requires and enables monetisation through multiple streams. Some of the biggest winners of the creator economy, such as David Dobrick, earn basically nothing from advertising revenue (the equivalent of the Spotify royalties for YouTubers). They use the demand they create via the engagement on their channels to sell merchandise, brand partnerships, and a whole host of other monetisation strategies. I’m not here to say whether this is the correct business model but it is clearly disingenuous to dismiss the creator economy for musicians by only considering one revenue stream and Elijah from Butterz does a great job of explaining it below.
The article also speaks quite directly to the negative impact of tech businesses such as Patreon, both in terms of their benefit to wealthy investors (rightly or wrongly those with capital have always benefited the most) and also in terms of setting false aspirations for a generation of young people growing up today.
If everyone’s a creator, who’s the audience? Moreover, in a supply-and-demand economy, when the creators are the majority, and the audience the minority — who’s paying who? Tim Ingham, Rolling Stone
I am again quite confused by this interpretation. The Patreon CEO promoting the statistic that 75% of young people want to be a YouTuber when they grow up is clearly not as controversial as the author makes out.
Young people have always had big aspirations, it used to be musicians and movie stars and now it’s YouTubers. If we were to ask the same question a generation ago, ‘If everyone’s a musician, who’s listening?’ It seems very simplistic.
For one, it is obviously impossible that everyone will achieve their goals but even if by some miracle they did, as long as they watched each other's content and participated in the economy by buying goods and services then advertisers would be equally as happy.
In conclusion, I agree with a lot of the general consensus that it is now very hard to make yourself extremely rich or even comfortably rich from being a musician but directing this energy towards Spotify seems misguided. The heyday of £10 albums is long gone, disruption cannot be undone, we must all push forward to find a solution that works for everyone, including the consumer, the tech companies, and those with capital to put to work.
The recent UK parliamentary report shone a line back on the major labels and the role they play. To me, this is an important point that everyone has to adjust to. Everyone needs to change. Majors need to find a way to enable artists to earn a better share, tech platforms (yes all of them) need our support to grow and prosper and artists need to adapt their business models.
Here’s to the future and some much-needed optimism.
https://www.rollingstone.com/pro/features/music-creator-economy-spotify-patreon-1199388/