Spotify boss hits back at Taylor Swift pay gripe

13 November 2014 -

CEO Daniel Ek defends billion-pound investment into the music industry that his platform has made since going live

Jermaine Haughton

Spotify’s chief executive Daniel Ek has staunchly defended the streaming service’s contribution to the music industry after pop star Taylor Swift removed her entire back catalogue from the platform. In a statement, the pop-country crossover singer accused Spotify of failing to “fairly compensate the writers, producers, artists, and creators” of the songs it hosted. However, in a blog post on the company’s site, Ek argued that the firm has paid out around £1.2bn into the music industry to date.

With 12.5 million of its 50m active members being paid subscribers, Ek said that Spotify has provided a suitable alternative to piracy, which does not pay artists at all. “You can’t look at Spotify in isolation,” he said, and stressed: “even 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. To say nothing of the fans who will just turn back to pirate services – and sure enough, if you looked at the top spot on the Pirate Bay last week, there was [Taylor Swift's new album] 1989."

Ek’s comments are interesting from a business-leadership perspective, particularly on the question of whether they have been issued as a damage-limitation exercise, with the aim of avoiding further artist departures. Either way, Ek is taking a hands-on and public approach to clarify his support for the way his firm does business.

Throughout his blog, Ek puts three main arguments – the first of which is to reject the myth that Spotify's “free” service means that artists are not paid. Arguing that 80% of its paying subscribers started as free users, Ek said: “Until we launched Spotify, there were two economic models for streaming services: all free or all paid, never together, and both models had a fatal flaw. The paid-only services never took off (despite spending hundreds of millions of dollars on marketing), because users were being asked to pay for something that they were already getting for free on piracy sites.

“The free services, which scaled massively, paid next to nothing back to artists and labels, and were often just a step away from piracy, implemented without regard to licensing, and they offered no path to convert all their free users into paying customers. Paid provided monetisation without scale, free reached scale without monetisation, and neither produced anywhere near enough money to replace the ongoing decline in music industry revenue.”

He added: “We had a different idea. We believed that a blended option – or ‘freemium’ model – would build scale and monetisation together, ultimately creating a new music economy that gives fans access to the music they love and pays artists fairly for their amazing work.”

In his second point, the Swedish entrepreneur tackled the myth that Spotify pays artists and writers less than radio stations and other streaming services. “If a song has been listened to 500 thousand times on Spotify,” he wrote, “that’s the same as it having been played one time on a US 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.”

Finally, Ek aimed to debunk the myth that Spotify’s service lowers overall music sales. “This is classic correlation without causation,” he said. “People see that downloads are down and streaming is up, so they assume the latter is causing the former. Except the whole correlation falls apart when you realise a simple fact: downloads are dropping just as quickly in markets where Spotify doesn’t exist. Canada is a great example, because it has a mature music market very similar to the US. Spotify launched in Canada a few weeks ago. In the first half of 2014, downloads declined just as dramatically in Canada – without Spotify – as they did everywhere else. If Spotify is cannibalising downloads, who’s cannibalising Canada?

Taylor Swift is the only recording artist to have gone platinum this year – selling more than 1m copies of the 1989 album in the first week of its release. Meanwhile, many music labels are struggling to break even in the face of easily accessible, free music online. Nonetheless, Mark Mulligan – editor of the Music Industry Blog – said that Ek’s references to piracy were misleading. "Spotify has done a fantastic job of giving the music industry's most valuable customers a new way of consuming music that is better value for them than buying downloads," he told BBC News. “But I don’t think it has done much to compete with piracy to be honest.”

Mulligan speculated that Spotify may have to adopt an approach similar to film-streaming sites such as Netflix, whereby they acquire new releases, but only make them available after agreed periods of time. Under the film industry model, movies are shown exclusively at cinemas before going to pay-per-view services, and only then do they make the transition to all-you-can-watch outlets such as Netflix and Amazon Prime.

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Image of Taylor Swift courtesy of Kobby Dagan / Shutterstock.

Image of Spotify logos courtesy of 360b / Shutterstock.