Radiohead’s Thom Yorke, other musicians protest Spotify’s policies

Categories: Chicago Sun-Times

By MARK GUARINO | Chicago Sun-Times

September 30, 2013 6:36PM

To Spotify or not to Spotify.

That is the question for musicians and independent record labels that say the popular digital streaming service, among many others that have emerged in recent years, is building its business model on their backs, paying them a pittance in royalties while luring customers with the promise of full access to their music.

Digital streaming via paid subscription services (Spotify, Rdio), Internet radio (Pandora, Sirius/XM) and non-subscription outlets like YouTube represents one of few growth areas for the struggling recording industry, up from representing 3 percent of total market revenue in 2007 to 15 percent in 2012, according to data from the Recording Industry Association of America. Total revenue from these services reached $570.8 million in 2012, a nearly 59 percent increase from the previous year.

Royalty rates differ depending on the platform the music is heard — traditional radio, where royalties go only to song composers and not performers, vs. satellite radio and online streaming, where Congress established a fixed rate system in 1998, allowing royalty judges to periodically adjust the rates. They now are $0.0012 or $0.0021 per stream, says Eric Schwartz, a copyright attorney in Washington who was formerly with the U.S. Copyright Office and now is involved with music licensing issues.

“Meaning if your song is played 1 million times, you get paid either $1,200 or $2,100. Either case is a pretty good deal for the webcaster,” Schwartz says.

Artists complain that Spotify streams cannibalize legitimate download sales, which generate higher revenue. Which is why a succession of high-profile artists this summer yanked their music from the service in protest: The Black Keys album “El Camino” is not available, nor are any artists on Chicago’s Drag City label, home to Joanna Newsom and Bonnie “Prince” Billy.

Also absent is solo music from Radiohead singer Thom Yorke, including Atoms for Peace, his new band that headlines the UIC Pavilion Wednesday.

“Make no mistake new artists you discover on Spotify will not get paid. Meanwhile, shareholders will shortly being rolling in it. Simples … We’re standing up for our fellow musicians,” Yorke said in a series of Tweets in July. Spotify CEO Daniel Ek responded via Twitter that his company is paying more than $500 million in royalties in 2012. “That’s real money,” he wrote.

Similarly, the surviving members of Pink Floyd published an editorial in USA Today this summer that lambasted Pandora for lobbying Congress to push for even lower royalty rates. “Everyone deserves the right to be paid a fair market rate for their work, regardless of what their work entails,” the band wrote.

Legacy bands are becoming more cognizant about protecting their back catalogs because they see them increasing in value. The reason: Streaming libraries are becoming a primary source for consumer listening habits, and large record labels are no longer investing in newer artists who can fill that void.

With 6 million paying customers, Spotify is where consumers are moving, which means some labels feel they have little choice but to work with the service even though it may harm potential sales.

“What’s good about [streaming services] is that they are getting people to pay for music, but it’s also a downside because it’s getting them to pay very little for a lot of music,” says Mac McCaughan, a co-founder of Merge Records, the Durham, N.C., label that is home to the Arcade Fire, Neutral Milk Hotel and Superchunk, among others.

Schwartz says that some praise on-demand streaming services for giving artists wide exposure.

“They will tell you that if nobody is listening then you’re out of business. You have to go where the people are,” he says. “That may be true for exposure, but given the small amount of monies paid … it’s not yet working as well as it should.”

Bruce Iglauer, president of Alligator Records, the famed Chicago blues music label, says he has “mixed feelings” about Spotify. Clearly, the revenue is not ideal: Iglauer calculates that, under the contract his label negotiated through Merlin, a third-party broker for indie labels, 270 streams of an Alligator song pay his label the same amount it earns from a single album download.

“So in order for a business model to work as an income source, these services have to be extremely popular and used a great deal,” he says.

For now, he says Alligator is embracing Spotify as a tool he hopes will encourage consumers to preview the music on his label and then encourage them to make a purchase. He is cautiously optimistic: “If you can go to Spotify and Rdio and stream an entire album any time you wanted and don’t mind listening to some commercials, the question is, ‘Does anyone buy the record?’ The answer is, we don’t know.”

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