It's very important to keep in mind that Spotify and Pandora keep very little of their revenue.
Based on calculations I did back in April, Spotify has about 3 million paid users and 10 million unpaid users. Spotify said they were on track to do close to $900 million in revenue this year. About $662 million was set to go to the record labels. After all of Spotify's considerable costs, they'll run a loss.
When Pandora went public last year, they did it on $75 million in revenue and $74.25 million in expenses in that quarter (a 1% margin).
The more successful Spotify and Pandora get, the more likely the record labels are to ask for more money in contract negotiations.
These are great companies that make great products. They will unfortunately be sharecropping on the music labels' land.
Just as many of us consider it unwise to build on Facebook or Twitter's platforms, we should be just as wary about building a business on top of the music or movie business (Netflix is in the same boat).
It will be awesome when Spotify (or others) starts signing up bands as a "record label" itself, similar to Netflix produced shows. (Maybe they already do this?)
Maybe that will attract more bands to directly do business with them.
If they have invested in Spotify, then they are just securing their place in case Spotify (or Spotify-like services) displace the old model. It doesn't mean that is going to make any difference in the change of business model when it happens.
If they have too much control in Spotify, someone else will start a new service/label. OR bands will just self produce.
It's not the artists receiving that, but the actual label themselves. Perhaps get a bit more clued up rather than attacking labels. They are a business after all. Artists do not need to sign with them.
People resent record labels for the past, when signing with them was practically the only option, and the terms of the contract were cryptic and frequently misunderstood by signers. When artists were promised 15% royalties, cryptic "breakage" fees and other deductions brought that number closer to 5%, and forced the artist to incur costs such as tours, concerts and marketing, leaving the record labels only responsible to print records.
Who's problem is that though? The artists should have had better legal representation then and made sure they thoroughly understood what they were signing. Not go and complain afterwards.
It mentions in that spreadsheet that the $0.004 the artist gets per stream is minus the 9% that CDBaby takes off the top. So, it's really like CDBaby gets $0.0045 per stream, and they give 90% of that to the artist.
It occurs to me now, though, that I've read in the past that Spotify doesn't actually pay the same amount per stream to every artist or label. Apparently it doesn't even pay the same amount to the same artist each quarter.
Based on calculations I did back in April, Spotify has about 3 million paid users and 10 million unpaid users. Spotify said they were on track to do close to $900 million in revenue this year. About $662 million was set to go to the record labels. After all of Spotify's considerable costs, they'll run a loss.
When Pandora went public last year, they did it on $75 million in revenue and $74.25 million in expenses in that quarter (a 1% margin).
The more successful Spotify and Pandora get, the more likely the record labels are to ask for more money in contract negotiations.
These are great companies that make great products. They will unfortunately be sharecropping on the music labels' land.
Just as many of us consider it unwise to build on Facebook or Twitter's platforms, we should be just as wary about building a business on top of the music or movie business (Netflix is in the same boat).