Is the Spotify Model Really the Answer?
There seems to be a great misconception about record labels and execs—perhaps almost a myth. I have owned and operated Mode Records, a NYC based label specializing in contemporary classical music (Cage, Feldman, Xenakis, etc) and jazz, for 26 years. We now have over 250 releases. This genre has always been a niche market, sales have always been modest (6,000 units is considered a real hit record), but yet one has managed to survive from the cash flow generated by the catalog and new releases. New streaming services like Spotify, that journalists like The New York Times‘s David Pogue praise so highly, however, have the promise to squeeze smaller labels out of the picture.
On a typical CD sold through a distributor (yes, still the bulk of our sales are wholesale), we may make a profit of $3-4 a unit. Already that is not much considering the total sales of a typical niche CD. Sales through iTunes or similar service can yield a similar profit. But this all gets turned on its head with the Spotify model. For example, in June 2011, Mode had a total of 11,335 streams through Spotify; our income was a whopping $36.98! A big individual seller that month, by composer Luciano Berio, was streamed 1,326 times through Spotify; our income $4.18. So, we earn about 1/3 of a penny per stream. And these meager amounts should be split with the artists and composers.
While the major labels and pop music may be able to reap a real income stream from Spotify simply due to the sheer volume of streams, the Spotify model is not financially sustainable for any indie niche label. As the industry moves more in this direction (competitor Napster, for example, only yields slightly more, about 1 cent per stream), it will simply choke the indie labels out of business.
I should also note that physical sales are down, and digital sales have basically been level for the past 6 months or more; I believe this to be industry wide. There is no growth. Promoting ways to move more music for even less money may sound good for society, but for the indie labels and their artists it is not a viable answer. I’ll leave the majors to defend themselves.
The music business is reaching a tipping point. If one cares about music, then you should support the artists and labels you like: buy a real CD, or buy the album or track from someone like iTunes. The indies and artists need your support. If the business tilts more toward the Spotifys, Napsters and the ever prevalent illegal free downloads, then the indies will start to disappear and the artists may be waiting tables for the rest of their lives. It’s OK to suffer for art, but everyone deserves to make a living.
Times are tough, expendable income is down, I understand. But there are real ramifications to the notion of getting more for less. Nothing is for free.