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Taylor Swift’s Faulty Math Gets Smacked Down by Spotify

Taylor Swift is a big name. Her name is bigger than “Spotify.” So when Taylor Swift pulls her music from Spotify, writes an op-ed piece in a major newspaper, talks to news outlets like Yahoo Music...
Taylor Swift’s Faulty Math Gets Smacked Down by Spotify
Written by Mike Tuttle
  • Taylor Swift is a big name. Her name is bigger than “Spotify.” So when Taylor Swift pulls her music from Spotify, writes an op-ed piece in a major newspaper, talks to news outlets like Yahoo Music, and generally uses her name and clout to press her side of an argument, she is going to get more press.

    The problem is, Taylor Swift is wrong.

    Swift has continued to lump legal, paying music streaming services like Spotify in with file sharing and piracy as part of the reason that artists aren’t getting what they are “worth.” As tightly as she sticks to this story, even in the face of disagreement from music business veterans — and mega-rich ones at that — like Bono, Quincy Jones, Dave Grohl, and others, one would think that Swift is a savvy businesswoman who knows something all the rest of them are missing.

    Not likely.

    Taylor Swift is free to make a business decision about who carries her music. If she is getting good advice on how to best “window” her sales, she can make more money. Good for her. If this is about making more money, then say so.

    The trouble is, Swift is not being transparent about her reasoning. If you want more money than you can make with Spotify, then give that as an honest reason. But to cast a legitimate service as in league with illegal channels like piracy and file sharing hurts the artists who are making or could good money from this “grand experiment,” as she calls it.

    She is making a faulty argument based on poor research. It beggars belief that Swift’s business team would not keep her informed about her real potential numbers through Spotify.

    When Scott Borchetta, president of Big Machine Label Group which carries Swift, spoke to Nikki Sixx in a radio interview about the dust-up with Spotify, he framed it as a move to prevent “embarrassing Swift’s fans.”

    “If this fan went and purchased the record, CD, iTunes, wherever, and then their friends go, ‘Why did you pay for it? It’s free on Spotify,’ we’re being completely disrespectful to that superfan.”

    “If you’re going to do an ad-supported free service, why would anybody pay for the premium service? It can’t be endless free. Give people a 30-day trial, and then make them convert. Music has never been free. It’s always cost something and it’s time to make a stand and this is the time to do it.”

    The error in Borchetta’s argument is that he implies — and maybe believes — that just because the fan does not pay to hear Swift’s music on (the free version of) Spotify, that no one pays. That is wrong. Spotify pays. They just don’t get the money from the fan. They get it from advertisers.

    This sort of “freemium” model is what thousands of websites, mobile apps, and other businesses are built on. It works. People make millions using it. For Borchetta to argue against it is flying in the face of business sense. What Borchetta and Swift seem to want is to make sure it is the fan who pays, not some third party.

    Borchetta must know that there are millions to be made from secondary sources and that not all money must be made from direct sales. So why would he insist that Swift angle her business toward direct sales only?

    Direct sales only is a more immediate revenue source. It brings in money now, at the possible expense of expanding fan base for future years. Borchetta is not Taylor Swift’s representative. He represents the label. What happens when Swift’s contract with his label ends and she gets a better offer elsewhere? His label’s revenue from her drops considerably, maybe even stops entirely. Record labels want the short money. They don’t want to “window” an artist toward longevity and expanding fanbase in the long run when that artist could take the entire thing to another label down the road.

    Swift herself demonstrated that she believes Borchetta’s short-term reasoning when she argued that allowing fans to listen to her music without having to pay for it themselves is “perpetuating the perception that music has no value and should be free.”

    By that logic, any television show that is not on a premium channel or pay-per-view is worthless. Hit shows like Friends, How I Met Your Mother, or Modern Family must be considered without value, simply because the end consumer audience does not have to pull out a credit card to watch it.

    Spotify CEO Daniel Ek, still being as diplomatic and conciliatory with Swift as ever, took to his company’s blog today to put up some facts that need to be part of the consideration for artists weighing whether to use Spotify or not.

    A few key takeaways from Ek’s post:

    Spotify has paid more than two billion dollars to labels, publishers and collecting societies for distribution to songwriters and recording artists.

    At our current size, payouts for a top artist like Taylor Swift (before she pulled her catalog) are on track to exceed $6 million a year, and that’s only growing – we expect that number to double again in a year.

    If that money is not flowing to the creative community in a timely and transparent way, that’s a big problem. We will do anything we can to work with the industry to increase transparency, improve speed of payments, and give artists the opportunity to promote themselves and connect with fans.

    [It is a myth that] free music for fans means artists don’t get paid. On Spotify, nothing could be further from the truth. Not all free music is created equal – on Spotify, free music is supported by ads, and we pay for every play.

    Today we have more than 50 million active users of whom 12.5 million are subscribers each paying $120 per year. That’s three times more than the average paying music consumer spent in the past… more than 80% of our subscribers started as free users. If you take away only one thing, it should be this: No free, no paid, no two billion dollars.

    If a song has been listened to 500 thousand times on Spotify, that’s the same as it having been played one time on a U.S. radio station with a moderate sized audience of 500 thousand people. Which would pay the recording artist precisely … nothing at all. But the equivalent of that one play and its 500 thousand listens on Spotify would pay out between three and four thousand dollars. The Spotify equivalent of ten plays on that radio station – once a day for a week and a half – would be worth thirty to forty thousand dollars.

    [It is a myth that] Spotify hurts sales. downloads are dropping just as quickly in markets where Spotify doesn’t exist. Canada is a great example… In the first half of 2014, downloads declined just as dramatically in Canada – without Spotify – as they did everywhere else.

    [E]ven though Taylor can pull her music off Spotify (where we license and pay for every song we’ve ever played), her songs are all over services and sites like YouTube and Soundcloud, where people can listen all they want for free… If you looked at the top spot on The Pirate Bay last week, there was [Swift’s new album] 1989.

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