Am I wrong or is Spotify going to have to charge all its users at some point?
December 23, 2012, 10:30 am
Filed under: Uncategorized

Spotify has basically ruined the economics of music-buying for me (in a ‘good’ way, short-term, but read on). I don’t even think I would consider ‘buying’ a music album anymore. That’d be a ‘waste’ of my money, because whatever it is (with some negligible exceptions), ‘I could just listen to it on Spotify anytime I want’.

Now, that’s great for me. I’m literally saving hundreds of dollars a year. But how is anyone making money, musicians or greedy music execs? I have to imagine the existence of Spotify is having the same effect on other former-music-buyers. And the current generation of tweens/teens growing up to be music fans, aren’t even forming the habit of buying music in the first place. ‘It’s on Spotify.’

So, that can’t continue, right? What’s going to have to happen, at some point in the near future when Spotify/The Powers That Be have determined that Spotify’s market (for lack of a better term) penetration is big enough, is that Spotify is going to slap a fee even onto all of its ‘free’ users.

Yes, X% will revolt and cry foul and curse Spotify and vow to never use it again, but (1-X)%, having gotten the Spotify habit, will acquiesce and pay, and that tradeoff will be worth it to The Music Industry, so they’ll do it.

Because if they don’t, isn’t the music industry going to just shrivel and die? What am I missing?

10 Comments so far
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I my opinion, there are two things developing (and they largely have developed already):

1) albums are now recorded as commercials for artists, who use those commercials to sell products such as, a) concerts, b) merchandise (t-shirts, etc.) c) themselves as spokespeople for brands, d) CD’s of their music sold at concerts e) advertisements on Spotify, Youtube, Facebook, etc. (As I understand it, artists do get some revenue from the ads sold on sites like Youtube and Spotify.)

2) the advent of subscription services and the destruction of iTunes.

The iTunes model does not work. The Spotify model works, but only partially. You can not listen to many of the trendiest albums, or the best albums on Spotify. I can not listen to most of the most beautiful high-end music (Classical, Keith Jarrett, European Chamber Jazz) , nor could I listen to the latest trendy music, because the artists know they can sell ten million CD’s at Wal-Mart before they have to release them to Spotify and other services. So, how much money would you pay per month to set all that straight? I would pay $20 a month. Wouldn’t you? I mean, if Spotify decided to charge you $20 a month with the understanding that you will get everything within six months? Yes, I would.

Comment by Pastorius

Who is selling ten million CD’s these days besides Eminem, Norah Jones, and Adele?

Comment by joshua

The albums-as-commercials-for-products thing is the standard line of information-wants-to-be-free piraters. I have my doubts as to how those numbers are supposed to work. How many people really buy T-shirts with band name written on it.

If free-Spotify’s ads pay enough to funnel a decent amount of royalties to artists then ok. I don’t know how those numbers work out but my guesstimate would be (a) it’s not much and (b) it’s a highly concentrated distribution (i.e. works well for the big artists, but everything beneath the A-list gets a trickle).

If Spotify came along with a $20/month service letting you stream (and record to mp3) anything, with a near-complete catalog, and no commercials, then yes I’d probably go for it. But that’s kinda my point: right now, there is the free option, and it suits 98% of my needs. It’s rare that I care about some album and can’t find it on Spotify; if I really really cared, I’d buy it, but when I do it’s almost more as a gesture of support to some artist I really appreciate than anything else, i.e. I think I did go out of my way to intentionally pay for Rush’s and Redd Kross’s releases this year, even though they got on Spotify in due time, or perhaps even immediately.

As a result of this, I don’t bother upgrading. My point is that Spotify can’t let that continue, they’re going to have to throttle me at some point and find a way to capture that $20/month I’d part with. Because right now their free-taste service is actively preventing me from spending anywhere near the money on music that I used to spend. I’m not ‘complaining’ about this, obviously short-term it’s great for me (though I do think something in the ‘album’ experience has been lost), but I just wonder how long it can continue.

Comment by Sonic Charmer

There’s no theoretical economic reason for the total revenue of music companies to go down. Whether people pay a monthly subscription or per album shouldn’t make much difference. The difference is psychological. People might be less willing to part with a large sum in one go each month, but might have spent more in total on CDs.

Comment by James James

The point is that right now, I’m spending far far less than I used to. This is because of Spotify, i.e. even if I’m tempted to buy some album, my brain tells me ‘dummy, you could just listen to it on Spotify’.

Comment by Sonic Charmer

Considering that
A) The price of the medium itself is now irrevocably tied to Moore’s Law, and
B) The world is packed with artists who perform just because of love for the music,
I fail to understand anyone who thinks the price of music should do anything BUT plummet.

The only reason expensive albums still exist at all is because they’re advertised like crazy. And of course, there will always be a market for albums as long as there’s a market for physical books (both make okay Christmas gifts, or at least we’ve been trained to believe they can make the difference between “guilty” and “non-guilty” around Christmas or birthday times)

Comment by Anonymous

Paid Spotify exists. It’s called Rdio. I use it and like it a lot. No idea if it’s sustainable. New technology plus old business models means the music *industry* may eventually shrivel and die, but music – even recorded music – never will

Comment by joshua

Yes, there will be a new model. My point is I don’t see how Spotify (free) can be part of that model, long-term, since it’s too much of a giveaway compared to the revenues they could (probably) be capturing. I could be wrong, but that’s certainly been its effect on me.

Comment by Sonic Charmer

[…] Sonic Charmer doesn’t bother to buy music anymore, because hey, it’s on Spotify for free… How long can this go on? Not very, he suspects: […]

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Paid Spotify is the only way to use it on your mobile device. That is probably the plan, since most people want to use it on their phone/ipod. Otherwise it is limited to your PC and then only for a certain length of time per day after the free trial ends. IIRC the free trial lasts 6 months if you sign up with facebook.

Is it sustainable? I don’t think Spotify is profitable currently, but then neither was Amazon for the first decade or so. One thing is for sure, and that is that the royalties will not be going up.

Comment by Matt

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