The fast-growing music-streaming service Spotify received a very public put-down on Sunday when singer Thom Yorke and producer Nigel Godrich, members of the band Atoms for Peace, announced via Twitter that their music would be pulled from the platform. Yorke, most famous for being the front man of Radiohead, also removed his solo work from Spotify. The move reignited a long-running debate over whether music-streaming services will ever be able to support an industry desperately looking for new revenue streams.
On Twitter, Godrich wrote that while streaming services can help established artists generate money from their past work, new artists are being stifled because of low payouts. “New artists get paid f–k all with this model. It’s an equation that just doesn’t work,” he wrote.
Spotify has always been silent about the details of its deals with various record labels, but a growing number of individual artists are divulging their financial information to shed light on how much money actually ends up in musicians’ hands. Reports from acts like Damon Krukowski of Damon and Naomi, folk artist Erin McKeown and cellist Zoe Keating indicate that independent acts make around half a cent per song stream on Spotify. That’s a pittance compared with the 7¢ to 10¢ an artist can expect to earn from a song download on iTunes and even further removed from what artists earn from physical CD sales.
So far, there hasn’t been much money for tech companies in streaming either. Spotify pays out almost 70% of its revenue to rights holders and is not even focusing on profitability right now, according to recent statements by CEO Daniel Ek. Internet radio service Pandora, which has lobbied Congress and even bought a conventional radio station in an effort to pay lower royalty rates to artists, has yet to have a fully profitable year, posting a net loss of $38 million for the 2013 fiscal year.
These companies promise that as they grow in scale, they’ll generate profits both for their shareholders and for the artists whose music stock the services. Spotify responds to gripes about its royalty rates by pointing out that it has paid out about $500 million to rights holders since it launched. But as Yorke’s frustration demonstrates, some artists are getting impatient waiting for these theoretical future earnings. “The problem is that it’s unproven timewise,” says Catherine Moore, an associate professor of music business at the Steinhardt School of Culture, Education and Human Development at New York University. “No one knows what the long-term benefit is going to be, and artists in general are looking at shorter and shorter career spans.”
Despite these issues, more competitors are entering the streaming fray this year. Google rolled out a Spotify competitor in May and Apple announced that iTunes Radio, a service more akin to Pandora, would launch in the fall. Beats Electronics, the company behind the popular Dr. Dre–branded headphones, is also launching a streaming service code-named Daisy later this year.
Though the tech world has made the shift to streaming services seem inevitable, many artists besides Yorke and Godrich have spoken out against the streaming business model. The Black Keys’ latest album isn’t available on Spotify, and band drummer Patrick Carney has said the service is fairer to labels than to artists. Alt-country star Jason Isbell called Spotify “evil” in a May interview with the New York Times. Last fall indie rock band Grizzly Bear tweeted that fans streaming songs through Spotify is about as helpful to a band as downloading music illegally through the now defunct piracy haven LimeWire. And many big artists of decades past, from Led Zeppelin to The Beatles to Garth Brooks, have never allowed their music on the service.
In many cases, though, it’s not up to artists to decide where their music ends up. Record labels often retain ownership of an artist’s music and can distribute it as they please. Revenue from streaming services like Spotify are distributed to record labels, which then pay artists. The three major record labels actually own a minority stake in Spotify, which means they will be earning profits from the company’s overall future success whether or not it benefits individual artists.
Though there have been some outspoken critics of Spotify’s approach to music distribution, most of the biggest contemporary acts remain available on the big streaming services. Perhaps it’s because they don’t know of a viable alternative. “It’s up to streaming providers to come back with a better way of supporting new music producers,” Godrich wrote on Twitter. “It’s not for us to think up how it could work. That’s your department.”
The alternative before streaming was rampant piracy. A fear of returning to the days of Napster — along with a complacency on the part of record labels who can win with Spotify without necessarily having their artists win too — may keep most musicians locked into the streaming services, whether they really want to be or not.
Artists “feel that for the past 15 years, they’ve had a situation where they’ve seen their music go out of their control,” Moore says. “That’s a situation that has led them to a feeling of lack of control, of helplessness, in the face of the changes of the industry. Some artists feel that they should be the ones that make a stand and say ‘Our music does have value.’”