(UPDATED) Avant cellist Zoe Keating has built her career outside the music industry machinery.  With 1.3 million Twitter followers (@zoecello), global touring, soundtrack commissions and collaborations with the likes of Imogen Heap and Amanda Palmer, her success is undeniable. But the shift from music sales to music streaming via Spotify and the lower payments that appear to follow is troubling her.

Artists who express opinions on subjects like politics or the music industry should expect to get a lot of negative feedback (“Shut up and make music!”).  I realize I’ve waded into waters that I’d be better off avoiding and I nervously await my impending doom.

Hypebot posted an article,  ”How Much Does a Band Earn From Each Music Platform“, which received enough comments that Spotify responded, “Spotify Responds to Artist Payments Controversy“. This in turn spawned another article, “Spotify Offers Additional Response to Independent Label Defections“.

A debate ensued in the comments and subsequently, a chap named Jay Frank wrote,  ”It’s not Spotify’s Fault That You Make So Little Money“.

For some reason I’ve found the subject compelling enough that I’ve foolishly squandered the precious hour of my one-year old’s naptime to write this. To me, the discussion is about a general philosophy of the world, but since it started with Spotify, here is my criticism.

It a killer app. Well designed. I like it as a listening platform. But what I think is totally wrong: Spotify pays different monies to different labels. As everyone is under NDA it its impossible to find out what those deals are but the word on the street is that majors receive profits from Spotify’s advertising revenue and indies do not. The end result is that a major artist makes more per play than an indie artist. Spotify doesn’t talk about this but The Guardian sums it up well.

FAIRNESS

That’s it. That’s my complaint: fairness.

If Spotify would level the playing field and make the distribution equal to all artists. I would lay off (since I am sure that my constant complaints are a total priority for them!). Now, if Spotify was to make those royalties algorithm-based, they’d have my full nerd support. For example if, thanks to their 'related' algorithm,  people listen to small-artist X after listening to large-artist Y, then I could see that a particular play, not all of them, of artist Y could be ‘heavier’. However, if people end up at artist Y by searching for them directly, the play-weight should reflect that. Data, do it with data!

But just to pay tracks from major labels more because they are major labels, that is so OLD. Where is the revolution in that?

Daniel Ek, Spotify’s CEO, posted a response to a question on Quora “How does Spotify split its contribution to artists?”

First, Spotify does not split anything directly with artists. Instead we have different layers of rights that Spotify has deals with. Those are record labels, publishers and collecting societies. Artists/Composers in their turn have deals with the above mentioned parties. The deals artists have with labels/publishers tend to differ quite a bit and therefore it’s impossible for me to say what an artist actually gets in the end.

Spotify has three buckets of revenue. We get revenue from advertising, subscriptions and paid downloads. All of them are very different as a subscription is €10, a song is roughly €1 and advertising is a pool of revenue based on ads per month. We share the vast majority of all revenue we get in to all the right-holders.

Our part in the end is not that different from how the Apple app store works, where Apple sells apps and get a small percentage. What makes it slightly complex is that we have many more layers of rights in many different countries.

It’s important also to mention that what Spotify is trying to do is to increase the amount of people who are consuming legal music. Our view is that there’s so many people enjoying music out there, every single day, but the massive portion of them are currently not paying anything. We are trying to bring them back to paying for music again. - Daniel Ek, Founder and CEO of Spotify

In the first paragraph what Mr. Ek says is: artists have different deals with their labels, distributors and publishers.  Um, yeah! The question was not well asked, but I do think he cleverly avoided the gist. Next, he states “We share the vast majority of all revenue we get in to all the right-holders.“ Translation: some right-holders do not get shares of all the revenue….but what we share with everyone, I’m not telling if those percentages are equal.

In the third paragraph, Mr. Ek goes on to talk about how the Apple store works. It seems to me that he missed one of the key things about iTunes: All labels get the same deal from Apple. I’ll repeat that. Whatever an artist’s deal is with their label is….ALL LABELS….indies, majors, DIYers, boutique, whatever….get the SAME deal from Apple. In other words, its fair. Its a meritocracy. Whatever you think about Apple, this was and still is a revolutionary idea. In this meritocracy it is still up to the the indie or DIY artist do to take advantage of all that fairness, and they still might fail….but at least the system isn’t rigged before they even get started. As for the alternative to piracy bit, I’m going to make a bold statement and say that  independent and niche artists have never been worried about piracy.

JAY FRANK

Anyway, to bring this back to Mr Frank’s article, you’d think that fairness would be a totally reasonable thing for an independent artist to ask for, but apparently not. His gist is that indies should stop complaining about their tiny royalties and be happy to be there. That their music might be listened to is payment enough. He does make some pretty convincing arguments for independent artists to leave Spotify en masse, because really what is the point if they are neither listened to or paid properly when they are? Although he says if an artist leaves, they run the risk of total annihilation.

People want to be entertained by music, not have to hunt things down. It has to be easy, which is why Spotify has gained so much traction. If you manage to get an average music fan’s attention on your band for 2 seconds and they look on Spotify and it’s not there, do you know what they do? They move on to another song. And you’ve lost your chance of gaining a fan. And the royalty. The number of people who would then spend time searching for alternative listening methods is miniscule. - Jay Frank

THE RISE OF THE NICHE

The only constant in this business is change, so I seriously doubt that Spotify is or will be the only music discovery app that people use. More importantly though, I think Mr. Frank ignores one of the major trends of the last decade: the rise of niche. The choices are not just Gaga-esque populartiy vs obscurity. While the press has focused on the demise of the traditional music industry, niche artists have quietly flourished. Using the internet to directly reach their respective audiences, niche artists make decent livings like they never could before. Not as glamourous perhaps, but small, efficient, and certainly more attainable.

The niche economy gets poo poo-ed by executives, but I don’t call the ability to feed, clothe and house my family 100% on my music income, insignificant (but its true, there might not be huge profits here for your shareholders).

If an artist is self-releasing and using a variable payment system to sell music (i.e. Bandcamp, Kickstarter, Vibedeck etc) in conjunction with flat-fee digital distribution (i.e. TuneCore), they don’t need to sell 100k copies of an album, 10k will do quite nicely (I say albums because that’s what I sell more of but it doesn’t matter: make your music in whatever format your art is best expressed, be it a carefully composed album of songs, one song at a time, a 2 minute video, or a 45-minute symphony on vinyl).

HOW ZOE KEATING MAKES MONEY SELLING MUSIC

• 65% of her income was music sales
• Of those music sales, 75% were digital.
• Of those digital music sales 55% were from iTunes.
• Streaming royalties and SoundExchange combined, made up 0.25% of her annual income.

How does streaming fit in here? In the niche model, all of an artist's music does not need to be readily and freely available everywhere. Niche artists have a valuable product that they should never be ashamed to charge for. What they need to do is polish their craft, make *some* music available for free listening, and be persistent in getting the story of direct listener support out there.  Although the music and the craft is key, I’d argue that in today’s world it is more important for the artist’s story to be ubiquitous than for their music to be. The message that niche artists need direct listener support in order to create music will lead to sales, subscriptions and backing, etc.

LETTUCE

Instead of music, I’m going to end on the exciting subject of lettuce. If you don’t mind your lettuce being nothing more than a crispy form of water, it's much cheaper and convenient to buy it at the supermarket chain. However, I like my lettuce to be flavorful and I want to support my local farmers, so I buy lettuce at the micro farmers’ market every Friday. If I am really craving lettuce on Wednesday I have to tough it out until Friday but the payoff is truly delicious lettuce (I’m not kidding. I never got excited about salad before) and I know that all of my money is going to a farm two miles away (some idealistic young-folk I call the ‘Suspender People’ because they dress like amish hipsters and plow with horses). While I’m at the farmer’s market, I also get to chat and catch up with my neighbours….its a very satisfying experience all round.

I don’t know if my analogy totally works, but I’ll tell you that I don’t buy lettuce at the supermarket for many of the same reasons that I don’t buy mainstream pop music from major label artists.

P.S. The day I wrote this, Facebook Music was unveiled, and yeah, its big news. Clearly it's more imperative than ever that Spotify fairly compensate indie musicians, but they shouldn't stop there. In exchange for using our content to lure eyeballs, Facebook, Spotify and all other streaming services should do more to facilitate the conversion from casual listener to fan: make it easier to buy music, fund a project, or hear about a show. I was encouraged by Pandora's announcement that is might start telling listeners when their favorite artists are performing near them (http://www.reuters.com/article/2011/09/20/idUS116823338520110920).

Also worth reading from Friday, another relevant article from The Guardian that addresses the issue of fair compensation for indie artists, "Why Spotify is right to limit free access" http://www.guardian.co.uk/music/musicblog/2011/sep/23/spotify-limit-free-access.

Disclosure: Zoe Keating is a booking agency client of Hypebot's sister sompany Skyline Music.