You may remember Taylor Swift? Aside from being the biggest popstar on the planet, she is also not afraid to court controversy, with the release of her latest platinum-selling album ‘1989’ coinciding with the removal of her back catalogue from music ‘freemium’ streaming service Spotify, claiming that she didn’t want her life’s work to be placed in the hands of a ‘grand experiment’. Since this occurred, Spotify hasn’t gone away, and ‘1989’ is still outselling even many of the bigger new album releases. ‘1989’ is still number 2 on the Billboard 200 chart, and according to United Album Sales, has shifted 55,000 copies this week, even 34 weeks after its release. Now with the advent of an Apple Streaming Service alongside a new Google Play Music service and pre-existing enterprises such as the artist-owned high-definition streaming service Tidal, where does all of this competition leave Spotify? What’s more, after Taylor’s short-lived twitter ‘feud’ with Apple over their payment of royalties during their 3-month free trial period, where does this leave her attitude towards streaming now that the buzz over ‘1989’ is starting to wane?
Our complicated story begins with Spotify, whose ‘freemium’ streaming business model attempted, and succeeded, in revolutionizing how music is accessed by the fans. In this model, they offer a vast catalogue of music for free streaming, funded by adverts, with the slight limitation that listeners would have more limited choice in what exactly they listen to, and with access only available online. If they so choose, there is a monthly fee for the use of ‘Spotify Premium’, which would allow them unlimited access to music, without interruptions by adverts and with access to their chosen streams offline. So influential was this business model that Spotify almost monopolized music streaming services, building up such a vast array of users that even the big label groups seemed to be at a loss of how to deal with them. This resulted in Spotify arguably doing artists a disservice, getting away with poor royalty pay-outs to artists, while citing numbers that look incredibly impressive, passing the $2,000,000,000 mark last year. However, hidden in the stats are less impressive statistics, such as the trillions of streams that were needed to generate this money, as well as the proportion that was paid to the labels to keep them happy.
More seriously for Spotify as a company is their revenue-and-cost balance. According to The Guardian, the year 2014 saw a 45% increase in revenue, but also net loss nearly trebled from €55.9m (£40.3m) in 2013 to €162.3m (£117m) in 2014. In layman’s terms, they are losing one hell of a lot of money. A big part of this loss may come from the fact that the ‘freemium’ service makes 91% of its income from the 25% of users that actually pay for a subscription, whereas the remaining 75% of consumers are only responsible for 9% of Spotify’s revenue. Whilst these numbers sound worse than they are in a vastly uncertain and pioneering industry, something is definitely not working for Spotify. With the introduction of media powerhouses Apple and Google creating their own streaming services, will consumers start to abandon Spotify for services that will pay more towards their musicians, as well as offering more for the consumer to use in terms of fresh innovations?
Since Apple backed down to Taylor Swift’s objections at them not paying royalties during the 3-month trial period of their service, they have released figures of their to-be royalty pay-outs, setting them at 0.2c per stream, nearly 30-times that of Spotify’s average pay-out of 0.007c. In response this is what Taylor Swift had to say on twitter:
“After the events of this week, I’ve decided to put 1989 on Apple Music … and happily so. In case you’re wondering if this is some exclusive deal like you’ve seen Apple do with other artists, it’s not. This is simply the first time it’s felt right in my gut to stream my album. Thank you, Apple, for your change of heart.”
Whilst Apple are providing a similar service to Spotify, they are not offering a ‘freemium’ style offer, instead charging $9.99 per month ($14.99 family deal) but offering more than their rivals, such as connection to Siri and a Sirius-style radio station called Beats1 Radio, offering exclusive material and headed by trendy ex-BBCR1 DJ Zane Lowe. As they did with U2’s ‘Songs Of Innocence’ album release last year, they also have the clout and finance to explore exclusive deals with some of the world’s biggest names. Pharrell Williams and Drake are the first two artists on their roster thus far, providing exclusive material for Beats1 Radio and Apple’s new Connect social media service, which will give Apple subscribers a direct line of communication to their favorite artists, both signed and independent.
However, despite this sound and innovative business plan, the biggest bargaining chip Apple have over their rivals are the devices that they can link up directly to their service. With over 400,000,000 iPhone users they already have a captive audience outnumbering the 75,000,000 active Spotify users, and with the iPhone starting out as a replacement for the music-specialist iPod, it will be all too easy for Apple to show a strong performance against Spotify when they launch.
Perhaps Taylor Swift is satisfied that Apple have the correct business plan to move artist/label-streaming relationships forward. Perhaps she just trusts Apple to safeguard her legacy since they are proven innovators in music sales, with their launch of iTunes completely revolutionizing sales in electronic form. Whatever the motivation, having ‘1989’ and the rest of Taylor Swift’s discography will be a major coup for Apple, giving them a huge unique selling point over their rivals.
Taylor swift has sold 24.5million career records. To put this in context, in the space of 5 LP’s and in an era where records generally aren’t selling well, Taylor has outsold all of her peers, and is just under halfway to emulating the record-breaking sales of legends like Bruce Springsteen and Madonna. I don’t think it’s an exaggeration to label Taylor Swift as one of the most powerful artists in the world, and an alliance with Apple, whether an official or unofficial one, may be all it takes to project her into new heights of stardom. Have we seen the death of streaming as we know it? Perhaps not, but regardless of the company that will still last in the end, the ‘freemium’ model of streaming is on its way out, and a new system is starting to emerge that will be fairer to everyone. When music labels start to flex their muscles and stop being dictated terms by Spotify, we are going to see some exciting developments.