Spotify: The Money Problems

Yesterday, we outlined what Spotify is, and why it's pretty cool. There have been, however, some classical music composers, players, bloggers, and audience members who aren't so thrilled.

Any new technology has its naysayers. The written word was heralded as The End, as was the printed word. Sheet music was seen as an encroachment, and recorded music in each of its many and varied delivery systems over the years has been criticized as being the death of an art form.

And it's true that with every technology there is a give-and-take that occurs with the old paradigm. With Spotify, the argument of its detractors is that the take is a lot more than the give.

As with most things, it all comes back to money. One of the largest and most vocal criticism of Spotify since it landed in July has been the compensation model that it uses for artists.

Here's how that model works:

Every time anyone plays enough of a track to be considered a "play", Spotify pays that record label (reportedly) one-third of one cent. That record label then pays the composer and the artist their share from that one-third of that one cent.

It seems like a pretty straightforward they-pay-as-you-play model, but when you look closer you see that the formula heavily (some would say cripplingly) favors major pop labels at the sacrifice of the rest of musicdom.

To elaborate --

Major Labels:

It's a simple issue of scale.

In its first week of sales in early May, the new Lady Gaga album, "Born This Way," sold 1.1 million units. Contrast that with the statistic that only around 25 classical records (not including crossover) have ever, in the history of recorded music, topped a million in total sales over the entire lifetime of the album.

With such a small per-play rate, you need to have millions of listens in order to make any meaningful amount of money. Small, and even mid-sized independent labels, who don't get those mega pop star numbers, are looking at paltry returns on their investment.

Additionally, as some those smaller labels would argue, each of those plays on Spotify for which they get so little represents one CD - the current "model of sustainability" with it's $9 price point - that they weren't able to sell.

Pop Labels:

Think about this - classical tracks can run 30 minutes, for which the label gets $0.0033 for every play. A pop tune lasts 2-4 minutes, for which the label gets $0.0033 for every play. Therefore, if you were to play a full Beethoven symphony (4 tracks) on Spotify, the label would get $0.0133 (or, more dramatically - one and one-third cents) for your listen. If you were, however, to play that full Lady Gaga album with 14 tracks, the label would get $0.0462 (or just about four-and-a-half cents).

Further Reading:

Brian Brandt from Mode Records outlines his frustration with the Spotify model and why he doesn't want his label to be a part of it.

A breakdown of what an artist earns through various sales media.

TOMORROW: How well does Spotify actually work? And are we better listeners for having this much access to music?