Is Spotify Bad News for Independent Record Labels?

Earlier this week German record label Century Media pulled their entire back catalogue from music streaming service Spotify. Century is one of the world’s leading specialist labels for extreme metal, playing host to some of the genre’s most innovative and exciting artists, including Orphaned Land, Intronaut and Borknagar. At various points over the last two decades such luminaries as Opeth, Mayhem, Exodus and Devin Townsend have graced Century’s roster, while subsidiary InsideOutMusic is home to prog metal titans like Pain of Salvation, Spock’s Beard and Aryeon.

For metal fans using Spotify, the Century Media pull-out is a BIG DEAL. Hundreds of records have disappeared from the service overnight, leaving a gaping hole in its hitherto impressive metal catalogue.  In terms of significance, it’s akin to a hip hop collection without any Def Jam albums or an indie anthology sans Rough Trade. So why would a well-respected independent label like Century decide to pull the plug on the increased visibility and revenue stream that Spotify offers niche artists?

Context

Spotify: ripping off artists?

In an official statement released on Monday, Century Media claimed that the decision to withdraw was taken to protect the interests of its artists.

“While everyone at the label group believes in the ever changing possibilities of new technology and new ways of bringing music to the fans, Century Media is also of the opinion that Spotify in its present shape and form isn’t the way forward…”

“At the same time Century Media also believes that Spotify is a great tool to discover new music and is in the process of reintroducing their bands to Spotify by way of putting up samplers of the artists. This way, fans can still discover the great music released by the label.”

“Physical sales are dropping drastically in all countries where Spotify is active. Artists are depending on their income from selling music and it is our job to support them to do so. Since the artists need to sell their music to continue their creativity, Spotify is a problem for them. This is about survival, nothing less and it is time that fans and consumers realize that for artists it is essential to sell music to keep their heads above water”.

While I’m aware that the relatively low royalty rate Spotify passes to independent labels is something of a sore point within the music industry, I find Century Media’s statement thoroughly objectionable. As one of the aforementioned fans and consumers, and an avid Spotify user, its naivety and myopia is nothing short of astonishing. There’s a real sense that Century is still clinging bravely to the shattered ruin that is the music industry’s traditional business model, despite the fact that the rise of the internet has allowed extreme metal to thrive in a way that was never possible before. Let’s take a more detailed look at some of the myths the Century Media statement attempts to perpetuate.

#1 – Spotify is causing physical album sales to fall

Nobody is going to dispute that CD sales are in steep decline. As the graph below reveals, since hitting a peak in the late 90s, album sales have fallen year on year. It’s also true that revenue from digital downloads has not even come close to making up the difference. Everybody is acutely aware that the traditional model of selling music is all but redundant.

That said, attempting to pin the blame on Spotify is simply ludicrous.  Spotify has been active since late 2008; the seemingly terminal decline in album sales started well over a decade ago. While there does appear to be some correlation between an especially pronounced fall in sales volume in the last three years and the launch of Spotify, let’s remember two important details. Firstly, this period dovetails neatly with the bottom falling out of the world economy. People simply don’t have the same amount of disposable income to blow on records as they did five, eight, ten years ago.

Secondly, while Spotify has been operating for a little under three years, it hasn’t had a simultaneous roll-out in all territories. This is important. It finally arrived in the USA in July after a couple of years of music industry cockblocking but is still unavailable in most European countries. Live in Germany, Italy, Portugal, Ireland, Belgium or pretty much anywhere in Southern and Eastern Europe and want to use Spotify? Unless you’re savvy enough to run it through a proxy and avoid detection, forget it.

Trying to find any pattern in sales figures from countries where Spotify is available versus those where it isn’t is a futile effort. While German album sales have fallen more slowly than those in the UK, Ireland has seen one of the sharpest declines in Europe; only 2% of all the albums released each year sell over 5,000 copies. If any pattern emerges across the continent, it’s that fewer records are sold in countries that are experiencing severe economic difficulties; less money in pockets equals fewer sales at record store tills. Local market conditions clearly have far more of an impact on sales figures than the presence or absence of Spotify does.

#2 – Spotify is preventing metal musicians from making a living

Like punk rock, metal isn’t a genre where you play for the money. Unless you’re in the top tier of bands with enough crossover appeal to bring in mainstream audiences or one of a very, very lucky few, you aren’t going to be able to make a living from playing extreme metal. This has always been the case; even at its commercial peak in the mid-1990s, the vast majority of performers in the Norwegian black metal scene held down a day job – assuming they weren’t dead or in prison – to make ends meet. Nocturno Culto of Darkthrone was, and still is, a primary school teacher, while Emperor’s Ihsahn kept himself afloat as a music tutor.

If anything, Spotify has actually opened an additional revenue stream for metal bands. While the genre has suffered at retail as much as the rest of the industry, there remains a very loyal, extremely devoted base of hardcore fans who continue to support their favourite bands by buying physical albums, attending live shows and purchasing merchandise. Many of those fans, including myself, also use Spotify. In June I bought Devin Townsend‘s Deconstruction and Ghost records on CD but also listened to them extensively on Spotify at work and through the Spotify app on my iPad. Thanks to Spotify, Devin – one of my favourite artists – has been paid twice over.

Then there’s piracy. Spotify has actually allowed artists to make some money (albeit on a very small scale) in a situation where sales were never likely going to happen in the first place. Century Media have fallen into same the trap as everyone from movie studios to video game publishers by assuming that a pirated copy of an album/movie/game is equivalent to a lost sale and that its associated monetary value represents lost revenue. This is preposterous; the overwhelming majority of pirates were never going to buy the record in the first place. Instead, Spotify offers users a legitimate way of listening to music for free (ad-supported) or for a relatively small fee (a Spotify Premium subscription) with royalties trickling down to bands on independent labels. However meager the sums of money involved, it’s a damn sight more than the artists see from outright piracy.

#3 – The internet has damaged independent record labels and niche artists

I don’t think anybody is going to deny that the internet has completely cannibalised the financial base of the majors but I’d argue that it has opened up opportunities for independent labels and niche artists that simply never existed until the dawn of the online age. Metal in particular has enjoyed an explosion in popularity and while it’s still very much a specialist interest, the internet has allowed thousands, if not millions, of new fans to discover groundbreaking artists that would have otherwise slipped under the radar. The never-ending stream of new bands, the rise of new sub-genres like Djent and the continued growth of the live scene owes much and more to the emergence of the online space.

Extreme metal has always suffered from a visibility problem but the internet has allowed the genre to grow, even while it has been increasingly marginalized at retail. As record stores – including large chains - have struggled to stay afloat, they’ve reduced the back catalogue stock they carry and gradually squeezed out niche artists, replacing them on shelves with cut-price DVDs, t-shirts and perma-discounted albums from artists on the majors. In short, unless you live in a major city it’s virtually impossible to find metal records from labels like Peaceville, Nuclear Blast, Southern Lord, Hydrahead and, yes, Century Media on shop shelves. Yet despite this, more people than ever before seem to be listening to extreme metal.

While I don’t have the figures to back it up, I’d argue that the revenue pie  has grown in recent years from a combination of records sales, merch and gigs. If Century feels that individual bands are finding it harder to make ends meet, that’s most likely down to the fact that more artists than ever before are competing for their piece of that pie, which can only be for the greater good, on a creative level at least.

Century are quite right to say that Spotify is a great tool to discover new artists but taking their back catalogue away and replacing it with a piecemeal selection of “sample tracks” isn’t the way forward either. Give people the ability to play their favourite tracks, recommend them to friends and share them in playlists so that extreme metal artists will continue to benefit from the increased exposure that only online word-of-mouth can bring.

Final Thoughts

Spotify’s response to Century Media has been interesting, as has that of the metal community (I’m planning to put together a Storify piece on this that I may retroactively embed in this post). The statement released by Spotify correctly points out that the service has helped to monetise an audience who were previously pirating music wholesale and that countries where Spotify is available saw an average 43% growth in digital sales versus 9.3% in neighbouring countries without Spotify. According to Billboard, Spotify is now the second largest single digital revenue source for European record labels, of which Century is one. This suggests that even if Spotify does result in an acceleration in the decline of physical sales, it’s offset by growth in the digital downloads sector.

As far as the blogger reaction goes, I’m very much with Vince Neilstein of Metalsucks on this one. I think Century Media have made a poor judgement call on this and are clinging to the shell of the music industry as it was. But those days are over. Rather than burying their head in the sand, Century should be looking at ways to open new revenue streams online and Spotify is just one of a variety of ways to do that. Withdrawing from Spotify only serves to push potential customers back towards piracy and make it less likely that they will buy physical CDs from Century Media, or indeed anybody else.

In the immediate wake of Century Media pulling out of Spotify, I toyed with the idea of cancelling my Premium subscription, which I’ve been happily paying for the better part of a year. After a little reflection and putting my thoughts in order when writing this post, I’ve decided to keep giving Spotify my £10 a month. Why? Several reasons. Firstly, Spotify helps provide niche artists with an alternative revenue stream to the decaying physical sales business model. Secondly, it allows me to share my favourite artists with both friends and strangers through public and playlists. Finally, Spotify is simply a fantastic service that is incredibly cheap considering how much it offers in return for your monthly subscription fee.

Ultimately, I’m not going to let Century Media or anybody else bully me about the way I listen to my music.