Basically, it's all here in this article in The Guardian by Helienne Lindvall: http://www.guardian.co.uk/music/musicblog/2009/aug/17/major-labels-spotify
Let me paraphrase what Lindvall says: In exchange for access to the music catalogs the labels own, Spotify gave the labels Spotify stock. Said stock is sequestered into the labels financial structure in a way that gives artists no access to the proceeds of this deal. Labels then agree to the lowest royalty rate in history, leaving even the biggest artists to collect paltry sums while Spotify and the labels build stock equity on their (the artists') backs.
According to Lindvall, even Bob Dylan has pulled all but three odd live and best-of records from European streaming services for similar reasons.
I have been puzzling over the Spotify royalty rates since first learning about them, and no matter how accurate or inaccurate the information I was looking at might have been, I couldnt figure out for the life of me how and why anyone would have agreed to these rates. What I also noticed while openly debating about Spotify royalty rates were a number sort-of-pro-Spotify arguments. In light of this information about the stocks deals, I feel I can finally publicly attempt to take a whack at these sort-of-pro-Spotify arguments without sounding like a conspiracy theorist.
Sort-of-pro-Spotify Argument 1: "You can't afford to not appear on Spotify because no one will discover you."
This is a very common thing for people who discover new music via Spotify to say. My problem with this argument is that it preys on artist insecurity, and it also fails to acknowledge that people who actively set out to discover new music are pretty rare. In my opinion - as someone who doesn't use Spotify and who doesn't actively set out to discover new music - this argument makes way too big of a deal about the exposure one gains from being on Spotify. But, opinions aside, we'd need some actual statistics before finally substantiating or debunking the you-need-Spotify's-exposure argument. In the mean time, I suggest a healthy skepticism whenever anyone suggests this argument. I mean, how would I know to even search Spotify for the artist in the first place, and, anyways, I can check them out on iTunes or something without using Spotify.
Sort-of-pro-Spotify Argument 2: "Spotify is the new radio."
The number of significant differences between Spotify and a radio station is large. Don't make the mistake of believing that because Spotify has free music interrupted by ads that it's at all the same in any other way.
a) Radio play is legally a public broadcast and pays a royalty to the songwriter via ASCAP, BMI, SESAC.
b) Radio does not give searchable access to countless albums by countless artists.
c) Even Pandora points a listener to iTunes where one can make a purchase; Spotify links to exactly nothing, and operates within its own app, essentially sequestering your interests and access inside of Spotify.
d) Radio (and I include Pandora here) very very rarely plays whole albums, and aside from 2fr-Tuesdays, rarely more than one song at a time by any artist. The broadcast of a single has been, since the LP existed, a great teaser/advertisement for the LP. And this leads to...
Sort-of-pro-Spotify Argument 3 "Spotify is going to help increase record sales."
It's a stated goal of Spotify to replace your record collection - in fact record collections more generally and globally - with their subscription service. Spotify makes more money when they can show advertisers that more people are using Spotify. Internet industry lingo for this is "flypaper," a sweet thing that traps those drawn to it. Because their main revenue is from selling flypaper to advertisers, Spotify actually benefits when you DON'T own records, and has an inherent motivation to get you to stop buying records. The only thing Spotify is going to try to sell you is a Spotify subscription, and maybe some Spotify-streaming stereo system for every room in your house, your phone, swimming pool, car, golf cart and toothbrush.
Sort-of-pro-Spotify Argument 4: "We just need to up the royalty rate."
This was my argument for a while. But even something as unlikely as doubling or tripling the royalty rate won't undo the fact that Spotify is out to bury the sale of albums once and for all, and at a doubled or tripled rate, the monetary value of recorded music still isn't flowing to the artists in fair proportion, and really won't if Spotify manages to establish the hegemony they're aiming for.
Sort-of-pro-Spotify Argument 5: "If you don't like it, don't use it, and stop bitching."
This argument has always confused me. The number of unfair things in history that would still exist if we followed such advice is enough to take us back to The Dark Ages. I know this isn't like a Rosa Parks-level injustice, but the underlying lack of logic might be more clear if we apply such logic to that historical case. In essence, this argument says, "shut up and do nothing," which is probably like 90% of the problem.
Sort-of-pro-Spotify Argument 6: "Record sales were never a huge part of artists income anyways."
Aside from being a dubious claim at best, any income is income and can make a difference. Each artist has some ratio of income from live show tickets, record sales, merch and licensing. Some rely heavily on record sales, some don't. But regardless, this doesn't make the deals the labels and Spotify are cutting somehow fair to artists.
Sort-of-pro-Spotify Argument 7: "Blame the labels. Spotify had no choice."
C'mon, Spotify had a choice. The choice to put ethics above profit margins. It takes two to tango. Both Spotify and the big labels knew exactly what was up. IMO, part of doing business is taking on the minimal ethical responsibility to at least understand the ethics of those with whom you do business. (Yes, I know I'm sounding pro-regulatory-anti-money-possibly-a-hippie-and-defintely-hates-Ayn Rand here. I'm cool wtih that.)
I'm continually floored by how many times I hear these different sort-of-pro-Spotify arguments. I'm assuming (the 'ass' part of that word noted) that many of the people using these arguments are assuaging the guilt foisted on them by exposure to how unfair Spotify deals are for the artists they (the sort-of-pro-Spotify folks) love. It reminds me of the arguments made by all the p-t-p justifyers back when things started to get really illegal and bad.
Look, I think the convenience of Spotify is pretty rad. Instant, searchable access to the history of all recorded music on my phone? There's no denying that that's an amazing and powerful bit of postmodern technology at work there, and I know it's not going away to be replaced with overpriced vinyl or some other retro-solution. In short, I'm not here to say we need to go backwards or that Spotify inherently sucks.
I'm here to say this: If you are like me and you really really like, maybe even love, the artists who make the records that set your life to the rhythms, textures and harmonies of human emotion and compassion, then perhaps you are also like me in that you'd like to do something to steer the flow of income generated by recorded music back toward the artists in a more fair way than Spotify currently makes possible.
And if we do have these things in common, then what are we to do?
In the early 1900s a group of songwriters-turned-activists including Irving Berlin and John Philip Sousa got together and formed ASCAP in order to collect royalties, and generally advocate, on behalf of songwriters. It worked, and, soon after formation, a lawsuit against a non-paying restaurant owner went to the supreme court where Oliver Wendell Holmes ruled in favor of the artists, thus establishing a much more fair set of regulations that we still use today, nearly 100 years later. (read more here: http://www.ascap.com/about/history/1900s.aspx)
How did Berlin and friends start on this campaign? They started by talking about it, gathering information, disseminating that information, building understanding. And that's what im trying to do here, and it's what I recommend we keep doing. I had a great teacher once, John Mohawk, who, in the face of someone saying "It seems all we do is talk about problems," said, "Well, if we're going to do something we better talk about it first, don't you think?" That always stuck with me.
I find the efforts of people like Eric Amble and Lindvall give rise to just the kind of conversations we all need to keep having if we're going to understand enough to know what's really going on. It's called advocacy, and if I'm right that fans actually give a shit about artists, I have a feeling advocacy might help.
I for one am greatly relieved to learn about the stock deals cut between the labels and Spotify, if only because I don't feel like a conspiracy theorist anymore. And while I am no lawyer, I have a feeling Bob Dylan might have a pretty good one, so I'm feeling encouraged that on a nuts-and-bolts-legal level the deals the labels are swinging with Spotify might get questioned in light of artists' contracts. And maybe the notion of a Spotify-song-play being a new type of quasi-public broadcast could get a closer look. And, perhaps, rather than withering on the vine, artists' income from record sales can sprout a few new leaves in this new and strange digital soil.
I can't claim to have the silver bullet here, but there are a lot of angles to explore, so I invite lots of open discussion. Have at it, please.
From my sonic heart to you,