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Are Spotify and Pandora evil?
November 24, 2013 1:26 PM

A few recent articles outline payments for musicians (lame right now) and the future of streaming...

Slate - "How Ashamed Should You Feel About Using Spotify?":

Streaming music is not the digital equivalent of radio. For the most part, each time a song is played on ad-supported Pandora or subscription-based Spotify, it reaches one person. Each time a song is played on the radio, it can reach thousands of people -- but when you turn on a radio station, you don't know what you're going to hear. Musicians expand their audience when new listeners stumble upon their work, which is why getting airplay is so important to them. Neither Pandora nor Spotify currently has anywhere near as many listeners as AM and FM radio -- another reason it makes sense for them to pay less -- but they also don't present the same kind of opportunities for discovering new music. Pandora lets you pick particular artists you like, so you'll hear them more often (although you might also discover similar artists you don't know already). Spotify lets you choose exactly what you want to hear from a near-infinite jukebox (although it has a "radio" setting, too).

But as the article points out, it's really the song-writers who have more to worry about in this new age of streaming music:

Performers benefit from having their recordings played that aren't directly monetary: glory, promotion, name recognition. Songwriters generally don't, so they get a rate determined by law when their work is purchased or played. Though middlemen such as performance rights agencies and publishing companies take their cut, somebody like Lowery can still see a significant trickle of money from co-writing a minor hit 20 years ago.

But the momentum of online streaming shows no signs of slowing—in the first half of this year, it was up 24 percent from last year -- and that's why songwriters are worried. Statutory publishing rates for streaming audio are currently low enough that the amount Pandora lays out for publishing amounts to only 4 percent of its annual revenue, or less than one-hundredth of a cent per stream, according to this editorial by two members of Congress. Pandora's hoping to lower that rate even further; earlier this summer, the members of Pink Floyd wrote an indignant USA Today opinion piece about Pandora's shady maneuvering.

FastCompany.com - "Let a billion streams bloom":

The last time it released numbers, in March 2013, Spotify had 24 million registered users, including 6 million paid subscribers, and was converting 20% to 25% of free accounts to subscriptions. When it launched in the U.S. two years ago, Spotify was in six countries. Now it's in 28 and expanding fast. According to a Swedish newspaper report in September, the company was pursuing additional growth capital (this time a loan) at a valuation of $5.3 billion, which would make it one of the most valuable private tech companies in the world.

Spotify is already generating significant revenue every month. So far, the company has paid more than $500 million to rights holders--70 cents of every dollar it receives goes to artists and labels--and payments from 2013 alone could add up to another $500 million. It is now the second-largest source of music-industry revenue after iTunes. Much has been made of the company's substantial losses--$77 million in 2012--but Ek says that if he wanted to turn on profitability, he could do it tomorrow by retreating to his most mature markets, where the business model is working. Instead, he's plowing every available krona and pound and dollar into growing Spotify around the world into what it already is in his home nation: the biggest new music brand in recent memory.

So, the real answer to getting paid by streaming is to get to 1 billion users asap!

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