The music streaming revolution is in full swing, and Spotify remains its talisman.
The Swedish start-up recently announced that it had secured 10 million paying customers - around double the global paying subscriber audience of rivals Deezer (5m) and Rdio (6m). (A rough but thoroughly fair calculation: if all of those Spotify customers were to pay the company’s standard £10 per month bill, it would amount to a cool £1.2 billion in revenue each year - and that’s not counting ad income from free users.)
Spotify’s overall scale is even more impressive: the platform now boasts in excess of 40 million active users across 57 countries. (A fun but thoroughly unfair calculation: that means Spotify’s total consumer base stands at around 250 times that of the headline-grabbing Beats Music - recently a key centerpiece of Apple’s $3 billion takeover of Dr. Dre’s empire.)
In the UK, successful promotional tie-ups with the likes of Vodafone and The Sunday Times helped Spotify pile on an extra million users in the four months to March 2014; storming growth further accelerated by the company’s recent affiliation with BBC Playlister, the Beeb’s agnostic referral platform to digital music services.
In fact, Spotify’s imperious market position and profile have combined to crown a brand that’s fast becoming shorthand for the entire streaming sector; like Hoover, Kleenex or Google before it.
Actually, maybe Google’s a bad example: the search giant’s Play service is one of a growing congregation of bulky corporate sharks looking to take a bite out of Spotify’s dominance. Beats Music may be comparatively weeny today, but the 500 million-plus credit card details obtained during iTunes’ lifetime suggest Apple will make it one heck of a future competitor. Amazon has now begun targeting mainstream consumers with its Cloud-based Prime Music offering. And Google Play’s recent marketing blitz has turned plenty of heads.
The man charged with assuring European music rights-holders that Spotify remains the best horse to back is its head of EU label relations, Kevin Brown. The good news for Daniel Ek is that Brown has some serious pedigree as a persuasive evangelist: earlier this year, the Scottish exec was named as one of the 20 Most Influential Britons working in the music industry - and one of the 500 most influential in the world - by The Sunday Times & Debrett’s.
Despite increased heat from new rivals, Brown says his core mission hasn’t changed since he joined Spotify in April last year. He’s convinced that not only is the service a hugely valuable revenue source for the industry - Spotify pays out 70% of its income to rights-holders - but that labels should embrace it as a powerful promotional tool to whip up interest in artists. (Brown’s other goal? Persuading the remaining few “flat-earthers” that streaming isn’t the business-crippling evil-doer some headlines would suggest.)
The exec’s belief in Spotify’s capabilities as an artist marketing channel runs so deep, he’s even developed a mantra to push around the industry: ‘On Air/On Spotify’. By placing an artist’s new record on Spotify at the same time it hits radio, he argues, labels give their fans the best chance to discover it, and then share it across social media.
“We’ve made great strides in the past few months,” Brown tells Music Week. “There are lots of enlightened execs working with us to create demand for their artists right at the start.”
Recent examples of On Air/On Spotify successes have included dance smash Hideaway by Canadian act Kiesza, which topped the Official UK Chart in April. It has flown past 380,000 sales since being made available on Spotify. And faith in the model is growing: another Virgin EMI release, Ella Eyre’s new single If I Go, is available now on Spotify, weeks before its official release date.
The growing affinity between Spotify and hit tracks is lent important verification this week with the news that the Official Singles Chart is to count streams from July. Brown readily welcomes the announcement - but his biggest bugbear with many labels remains their inconsisent albums strategy.
Mention the word ‘windowing’ in Brown’s company and his face instinctively screws up into a grimace. Advocates of this practice - holding an album off streaming services for at least its first week on sale - argue that it maximises sales. Coldplay and Sam Smith were both recent high-profile windowers - their respective latest LPs were not available on Spotify in their debut week. Both hit No.1 on the Official Chart.
Brown is unequivocal in his response: “All holding back an album achieves is disappointing an artist’s fans. Artists are turning their back on those fans on Spotify by denying them the opportunity to listen on their music service of choice.”
Other superstars have embraced Spotify with their album releases: Lana Del Rey’s Ultraviolence, which hit No.1 on the Official UK Chart on Sunday, has been available on the service since day one.
It was perhaps written in the stars that Kevin Brown would eventually work for a transformative global technology company in music. Having studied computer sciences at university (“I’ve always been a little bit of a geek”, he admits), he began his music industry journey in a common realm: behind the counter in a record store.
Brown’s three-decade career in the label business took him from super-hip indies (4AD) through to heavyweight majors (EMI Music, Arista/BMG). He eventually specialised in international and digital marketing before going on to manage acts.
“When digital first really impacted the music business, I was working in international so had an interesting perspective,” he says. “I find it amazing that so much of the record business is still configured to serve analogue and local first. In 2014, digital and global should be central to release planning.”
Music Week sat down with Brown to ask him all about On Air/On Spotify, as wall as streaming’s potential within the record industry - and why he feels that YouTube, rather than iTunes, is Spotify’s most dangerous rival…
Why is On Air/On Spotify so important to you?
It’s the single thing I talk to labels about the most. Historically, Spotify has been viewed as a commercial service by the labels, because our deals focus on royalties [while YouTube is seen as a media/marketing partner]. But we’ve got more promotional capabilities than YouTube, plus we’ve got an extra social layer from people sharing music on Facebook and Twitter. We wrap all these things up, yet we’re still put in the same commercial bucket as iTunes, rather seen as a promotional partner. It drives me crazy.
In a nutshell, why go On Air/On Spotify?
As soon as music is available anywhere online, by definition it’s available to anyone. To use Daniel Glass’s analogy, that’s when you should turn on all the taps. Consumers can always go to Grooveshark or YouTube to get it. The whole old world model of using scarcity to build demand is not fit for purpose anymore. Access creates awareness, awareness creates demand, demand creates consumption and consumption generates revenue - especially when it’s happening in the right place.
When you say ‘in the right place’, you mean Spotify - or at least ‘not YouTube’? Isn’t that an easy argument for you to win amongst rights-holders?
You’d think, wouldn’t you? For some reason, YouTube historically has had a free pass because they’re seen as this promotional outlet. As I say, we can deliver all of the promotional value of YouTube, but as part of an integrated plan alongside editorial, social and marketing opportunities. When a label delivers their music to YouTube but holds it back from Spotify, it’s not only illogical, it’s painful to watch.
You sound like you’re not bothered by iTunes!
What a label does with its iTunes release, I’m agnostic about. I don’t see iTunes as being our primary competitor - that’s YouTube. YouTube is a music streaming service, we’re a music streaming service. The important milestone for me is getting new music in line with YouTube. iTunes - as it stands - is an a la carte download service.
It might not be soon though, especially after the Beats acquisition. And then there’s Amazon Prime, Google Play and YouTube’s new service...
It’s definitely getting more interesting out there. But in stark contrast to all of those other players, Spotify’s core business is streaming music. That’s what we focus all of our attention and resources on - to make the product and user experience the best possible.
What about when iTunes runs a pre-release album stream - as seen recently with Paolo Nutini and Coldplay. Do you think that’s a misguided strategy?
Well, for a start, it’s not monetising. Secondly, it has in the past exacerbated piracy. It’s also a very poor user experience: a consumer thinking [an iTunes pre-release stream] is what music streaming is about is a lost opportunity. It only telescopes sales that an artist or label would already get in the first week into the first day. The real benefit to labels is obviously the real estate that they get on the iTunes store. But Spotify can deliver the same sort of exposure in advance. The whole concept of release dates appears to be becoming more elastic anyway.
What does the inclusion of streams into the Official Singles Chart mean for Spotify?
It’s a validation, were it needed, that streaming is now part of mainstream music. We’re delighted that the UK Official Singles chart is reflecting the current rapid shift in music consumption. It should accelerate the adoption of more enlightened marketing strategies within labels as to how streaming platforms can build audiences, both when music is commercially available and in advance of release. The more progressive labels are no longer asking, ‘Why should we go early with Spotify?’ They’re asking: ‘Why would you not?’
Surely the next step is to get streaming into the Official UK Albums Chart?
Yes. Conversations are going on in the UK and around the world as to how that could work. It’s a little more complex to define what consumption of an album looks like in the streaming sector but it’s just a case of finding something everyone’s comfortable with. It’s inevitable, and I think the sooner we can make that move the better.
Will streaming being counted in the Albums Chart help stop the recent rash of windowing we’ve seen from the likes of Sam Smith and Coldplay?
I’d call it more of a trickle than a rash! Of course it will help - it’s another factor in the conversation. But rather than using the charts as a crutch to win the argument, I would far rather that, philosophically, everyone understood the benefits of working with Spotify. Success can be measured in a number of ways; sales is only one [option]. Personally, I think?ongoing consumption is a better metric. For example, Lana Del Rey is currently the No.1 most streamed artist on Spotify worldwide.
Are you confident that if Coldplay and Sam Smith hadn’t windowed their UK album releases, they would have sold the same amount week one?
Yes, I believe they would have sold more, thanks to the extra exposure and word of mouth afforded by streaming services. There’s a belief in some areas of the business that this is a binary question; that consumers will either stream or they will buy. That’s just not the case. In the singles world in particular, a rising tide lifts all boats; when a track or an artist is successful, they’re successful on all platforms. If you look at any of these hold backs, the same albums were freely available on YouTube in full in the week of release - not to mention torrent sites. As such, to say, ‘these albums are not available on streaming services’ is untrue. All the artists are achieving by holding back albums is disappointing their fans. They’re either driving them to listen to something else, or damaging their own revenue stream. They’re also depriving our users the opportunity to listen to the album and then go out and buy it.
So Spotify users definitely still buy music?
Yes. There’s an industry myth here, a product of execs projecting their behaviour onto our 40 million-plus users. Just because you might not buy music now you’re on Spotify Premium, that doesn’t go for everyone. In fact, Spotify users still buy lots of music, but they expect to be able to listen to an album in full before making a decision. We have independent research which shows the majority of our users on both free and premium tiers buy music. The idea that holding back your product from Spotify will increase your sales is nonsense. It’s important to distinguish between causation and correlation. Spotify is not available in Canada, where they’re experiencing similar download drops [to the UK] - that suggests we’re not the cause of those falls.
Some acts, of course, don’t put their music on Spotify at all. One recent infamous - and successful - example has been London Grammar…
The number of times over the past six months I’ve had to bust the myth that London Grammar’s record was successful because it wasn’t on streaming services is astounding. Guess what? Their album’s up on YouTube, a streaming service, and half the album’s also on Soundcloud. Outside the UK, it’s on Spotify everywhere because Ministry have licensed it. In Australia, it charted at No.2, the same position it reached in the UK, and it’s on Spotify over there. London Grammar’s album was successful because it’s a good record and people wanted to hear it. Had it been on Spotify, it would have been even bigger.
Spotify has recently been cited as an example of a fair global digital music service by the indie labels currently fighting YouTube for better royalty rates. I take it you’re pretty happy about such a public comparison?
I wouldn’t like to comment on that. I would point you towards the Merlin numbers published last week [which showed that streaming now generates more than 50% of income for 1/5 indie labels]. That nicely illustrates our strong relationship with the independent sector. Early last week, the new Alt-J single, Hunger Of The Pine, debuted on Zane Lowe’s Radio 1 show. At exactly the same time, it went live on Spotify. That’s a great example of an enlightened release policy.
What proof do you have that On Air/On Spotify actually works?
To give you an example, funnily enough, you can look at the Coldplay comeback single [Magic]. When that was released at the start of March, we put together an unprecedented marketing and promotional campaign. It delivered the fourth highest week one streams for a single in Spotify’s history. At that point, the track had next-to-no pre-awareness and very little airplay. I’m sure everyone would agree Magic isn’t an obvious pop single. Other tracks in our Top 5 are Avicii, Daft Punk… more typical hit singles. That demonstrates the difference we can make by putting a new piece of music in front of tens of millions of users.
Is Spotify a natural enemy of radio?
No. The user cases show they’re very complementary. I know some radio programming directors out there that see us as a threat. I don’t buy the idea that someone might stop listening to what is a very passive experience with a human presenter, and then go and subscribe to a service like ours, which is active and involved. Many people in radio stations agree. Look at the BBC Playlister - the BBC obviously sees us as complementary.
How much real interest does Spotify have in converting free users to paid users?
It’s in everyone’s interest. That’s the way our model works, it’s critical. The free tier is the funnel to introduce people to the service, then over varying degrees of time, they will convert to the premium.
Spotify recently gave even more away for free, including extra mobile benefits. How does that tally with a drive to get free users to pay?
Most people are now on mobile, so it’s all about attracting them via a mobile-first strategy. Previously, we didn’t have a free mobile product outside the US. Now we’ve got that, so anyone can access Spotify for free on their preferred device as a first step, then ultimately convert into a paying consumer.
Recent studies suggest that by only offering a £10-per-month premium subscription tier, Spotify is out of the price range of many consumers. Could that change?
The important thing for us at the moment is to keep the proposition straightforward. Particularly in the UK, we need to keep things simple; the concept of streaming is still requires a degree of public education. To further complicate that makes the job more difficult. In more mature markets, we perhaps have the scope to introduce tiers at other levels of pricing in future - although it’s important to say I have no information to suggest that will happen. In the Nordics, for example, there is some discussion around how Spotify could introduce a family plan. One of our competitors there, WiMP, has got a high-quality audio tier; that’s another thing we’re looking at. Bottom line, there needs to be maturity in the market before you start introducing more complexity to the proposition.
Let’s talk about artist payouts. We now appear to be at a new level of debate: rather than concentrating on what Spotify pays, acts such as Billy Bragg are encouraging labels to give artists 50% of their royalties. But even Beggars Group now says that level of payout is no longer economically possible.
I wouldn’t presume to advise labels what to do in their relationships with artists. But obviously there’s a dialogue that will happen between labels and the artist community over the coming months and years regarding what is a fair and equitable split of income. All we can do is try and be transparent about what we do with our finances. I think Beggars’ approach, in terms of being upfront and honest and involving artists in the conversation, is a really good one. As to what the final solution will be, who knows. Artists will either recognise the value a label brings to their career and therefore let them take a certain slice of the revenue, or seek out other routes to market.