How the War Over Streaming Services Changed the Music Industry

Angelo Franco


When Taylor Swift’s 1989 album became the only record of the year to reach platinum level, that was the second biggest news in music of 2014.  The most important news of the year in the industry came when Swift pulled her entire catalogue from the popular streaming service Spotify one week after the release of her album.  The move, more so than spark a heated though admittedly civil battle between Swift and Spotify, has opened the gates to a debate about the future of the music industry. Swift’s decision was met with mixed feelings by fans, fellow artists, and industry professionals, triggering a conversation about how artists deliver their product to listeners and how these, on their end, are consuming music. 


As the catalyst of her decision to yank her catalogue from the streaming service, Swift cites devaluation and depreciation for her music when audiences can listen to it for free. She also believes that artists receive unfair monetary profit in return when their works are available on services like Spotify.  In an op-ed she wrote for the Wall Street Journal last summer, she comments on the drastic drop of album sales in recent years, singling out piracy, file sharing, and streaming as notable culprits.  More recently, she has said that this is a way to teach a younger generation about investing in music, echoing her remarks about music being an art form and should thus be valued and compensated.  This is also not the first time that Swift has been apprehensive about releasing her work on streaming services, especially Spotify.  After the release of her album Red, she refused to make it available on that platform and allowed it only months later. 


On its part, Spotify has issued a number of figures and statements to counter Swift’s decision.  Most notably, it has reiterated its mission statement that Spotify was created precisely to combat piracy and file sharing, which it too affirms are the cause for declining music sales.  In 2013, after mounting pressure and curiosity, Spotify released figures on their payout rates, which range from $0.006 to $0.0086 per stream.  According to Spotify’s CEO Daniel Ek, going by this payout model, it had paid Swift’s publisher and label over half a million dollars for streams during the one month that her first single “Shake It Off” was available on the platform, adding to $2 million worth of all of her last year’s streams. Apparently, she was on track to make close to $6 million dollars this year.  Rebutting this figure, Scott Borchetta, the CEO of Swift’s label Big Machine Records, stated that she had only received $500,000 from Spotify for streams of her music for the entirety of 2014.  


It is these bold moves and statements that have spurred the discussion, bringing into question just how much power artists have over their work, how it is marketed, and how they are compensated for it.   There are many other big name artists who have also taken a stand against streaming services, including Jason Aldean, Prince, Garth Brooks, and even the Beatles.  Brooks does not even allow his music to be sold or streamed at other music services including YouTube and iTunes, two enormously influential music platforms.  Instead, Brooks offers his albums exclusively as physical compact discs (and vinyl) or through his own online music store, Ghostunes.  He mentions the need to have complete ownership of his creative property as the reason to limit the venues where his works can be found.  Other approaches, such as Prince’s, seem a little more eclectic.  He has chosen to post concert footage on YouTube while making almost his entire catalogue unavailable on the site. Conversely, most of his classic catalogue is on Spotify, as are his two well-received 2014 albums, but his self-released works such as Emancipation are not on the platform. 



Prince owns the record label that releases his music, and some mention that known artists such as Taylor Swift and Garth Brooks are able to exude this kind of power over their creative property because they are signed on indie labels, while other lesser musicians who are signed on larger labels, such as Universal or Emi for example, and independent artists have no say as to how their work is distributed.  


For many self-produced, independent musicians, services like Spotify and YouTube serve as powerful marketing tools to be recognized in a saturated market, allowing them to enter the industry by discovery rather than listening choices of any one consumer.  This, of course, is not always the case.   Aloe Blacc, who co-wrote and sings on Avicii’s top-charting single “Wake Me Up!” received less than a $4,000 domestic payout from streaming services.  This is an exceptionally low figure considering that the single was the most streamed song in Spotify’s history and the 13th most played song on Pandora since its release in 2013.  The payout for the single from Pandora as of November of last year amounted to approximately $12,350, which was then divided between three songwriters and the publisher of the song.


But it is perhaps this precise model that puts into perspective the complexity of the music business.  Spotify falls under one of three legally streaming models: an interactive platform.  This differs from online music stores such as iTunes, who have set prices for each song or album downloaded and then pay a percentage of that to the label that owns the rights to that work.  Pandora, a non-interactive platform, functions much like a radio and is therefore covered by the Copyrights Act, which means, essentially, that the service offers a payout each time it plays a song.


Therefore, it may be easier to track sales from iTunes because of set monetary gain, especially if a listener purchases an entire album.  For a service like Pandora, on the other hand, financial profit may be more difficult to foresee and exploit because if a listener picks a “radio station” based on a particular artist, they may hear a few songs from that same artist only every now and then, and it is extremely unlikely they will hear an entire album.      



Then there is the actual flow of cash.  For every song produced, there are at least two copyrights.  These include sound recording, which typically includes the artists, his or her label, and the company trying to play that song, such as Rdio, Spotify or Pandora.  The other is the musical composition, which includes the songwriters, publishers, the people who recorded the song, etc. There is also a different payout to each of these copyrights depending on which platform a song is played.  AM/FM radio, for instance, is not obligated to pay the recording artists for broadcasts of any given song; they do, however, pay songwriters for use of their creative property.  Pandora, on the other hand, allegedly pays recording artists approximately half of its revenue, but only about 6 percent of that trickles down to songwriters.  In the case of Spotify or Rdio, their payout goes to the entity that owns the right to a song.  For Taylor Swift, this would be Universal Music Group, which is why it may prove difficult to track how much profit she actually made from streams on Spotify as the performing artist. 


In the figure that Borchetta cited, for instance, global streaming is not accounted for.  Time Magazine, which featured Taylor Swift as the cover story of its November issue, posted that her single “Shake It Off” was indeed the highest earning song on Spotify for the month of October (the one month during which the single was available on the platform), garnering a payout between $230K - $390K. However, even after Universal received the payout as the first beneficiary, Big Machine then gets a cut out of that same figure. Before any monetary gain reaches Swift as the performing artist, the labels also compensate the license for musical composition.  And even though Swift’s family owns Big Machine and may thus offer a bigger payout to its most lucrative artist, and she is credited as the author or co-author of many of her songs, it remains unclear how much cash Swift eventually received from Spotify streams. 


The changing landscape of how music is consumed plays a big part in this debate.  There are even two different records that can claim to be the best selling of 2014, depending on which sales metric is reporting.  According to Nielsen SoundScan, Swift’s 1989 album narrowly defeated Disney’s Frozen soundtrack with the most records sold at 3.66 millions in the United States – the latter sold 3.53 million copies.  But in a new metric model introduced last year by SoundScan and Billbaord, which takes units and converts them into equivalent album sales by accounting for streams and downloads, Disney’s Frozen came in first over Swift’s album.  This may be due to the fact that 1989 was largely unavailable in streaming services.


Taylor Swift has kept her catalogue on YouTube which, many argue, offers the same basic streaming options as Spotify, though it may be admittedly more cumbersome to navigate for the purpose of listening to music.  The number of views of her music videos on YouTube nearly doubled in the days immediately after her catalogue was pulled from Spotify, which falls under the time frame that her second single “Blank Space” was released.  Her catalogue is also available on Rhapsody and Beats Radio—the latter of which is owned by Apple—but only to listeners with a premium package. 


This, in essence, is what Taylor Swift is battling for.  As one of the most successful musicians in the industry today, she just made history by becoming the first female artist to unseat herself from the top spot on Billboard’s coveted Top 100 list.  Her decisions and opinions matter.  But how this will affect the music industry at large in terms of reaching audiences remains to be seen. 


Album sales dropped 11.2 percent from last year, while streaming through services like Spotify and Rhapsody are up by as much as 54 percent from last year. In the aftermath of this decision to pull her music from Spotify, with Swift’s yearning to boost physical albums sales and Spotify maintaining that its model is the best way to combat piracy, the long-term repercussions are vague.  Spotify seems to be a far from perfect business model for performing artists, and Swift, a powerhouse in the industry, may not be able to revive album sales on her own.  This may eventually lead to a bipartisan discussion between the platforms and the artists, including their music labels, to build a music model that will be fair to artists and consumers alike.     


Author Bio:

Angelo Franco is a contributing writer at Highbrow Magazine.


Photo credits: Wikipedia Commons; Chris Hakkens (, Creative Commons)


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