Article by sebastian marulanda

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unched on his squeaky stool, Kevin Murray fiddles with the snare nestled between his legs. You can feel the coquetry between his eyes and the rest of his drum kit as he speaks, letting his hands slowly inch their way across the toms. “Most people who I’ve talked to, you ask them who their favorite band is and they name, like, the same three people that everyone else names...People just turn on the radio or a Spotify playlist.” His gaze slips to the floor, “no one is seeking out individual artists, music has become very similar. I think because of that, people don’t seek out new stuff.”

With lamentation in his eyes, Murray raises his eyebrows adding, “They’re not going out to buy new records and they’re not asking their friends who to check out...” His hand continues to amble across the drum heads. “I never really hear people talking about that… I think that by losing the interest in individuality in new artist, people don’t spend money on it.”

New artists are exposing themselves to an evergrowing population of internet consumers every day, but they’re getting no response. Meanwhile, popular artists are throwing their intellectual property towards music streaming services like Spotify and making little to nothing. This makes a billion dollars worth of debt seem quite shocking for a company as seemingly well off as Spotify (MacMillan, Douglas). With artists losing interest in music streaming due to lack of compensation and companies not making a profit, it’s no wonder that so many people are asking what’s happening backstage.

Spotify has been perched atop the musical food chain for a while now. Today, the company is known as the leader in the music streaming business but unfortunately – and to no fault of their own – there are a couple of errors in the business model.

Music streaming itself is a highly unsustainable form of selling music. It doesn’t make enough profit for the company, or anyone else behind the music such as the producers, lyricists, songwriters, etc. (Stein, Evan) (MacMillan, Douglas) and this is just the tip of the iceberg.

Streaming music also happens to be bad news for many smaller artists. Not only is Spotify completely destroying the amount of profit a musician might earn from selling physical records, but new artists aren’t getting the amount of exposure they might get by selling

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“I used to really like listening to albums because they had a flow to them I really mourn that loss.� -Marty

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CDs because the company is too busy pushing what sells (Newman Melinda). For already established artist, Spotify is making steady record sales plummet because fans are more interested in listening to their artist for free than buying their records, and Spotify encourages this (@RosanneCash). While some have said that streaming music is the savior of the music industry, others have still yet to be convinced.

The entire dilemma started when the compact disc first came around in the 1980’s. People began to buy the same records on CD they already had on vinyl, because they were more “precise” and the newest form of audio (Newman, Melinda). With CDs, you could skip to your favorite song at the touch of a button. This turn-ofthe-century technology gave listeners a rather large incentive to get their favorite vinyls on CD causing record company’s sales to take off. This was nothing new as sales had increased in a similar way when vinyl EPs came out. What record companies didn’t predict was the mass-scale pirating that would occur afterwards.

(Stein, Evan) In 1996, a pirating crew called the Warez Scene began to pop up. Originally made in the 1980’s, members of this elite hacking group were able to reap the rewards of unreleased product.

Everything from fonts to pornography was available and sometimes would arrive before it even hit the shelves.

Music was untouched territory until the MP3 standard came along. This digital format could shrink music files by 90% and made music sharing a highly viable option. On August 10, 1996, the Scene’s first “officially” pirated MP3 (Metallica’s “Until It Sleeps”) hit the web. Within weeks, thousands of other songs had been stolen and the art of piracy began to truly manifest (Witt, Stephen).

From this same pirating scene came the famous file sharing platform that would make or break albums at any given time. Public file-sharing had never been so accessible and in turn, so dangerous for the artists.

In June of 1999 the site called Napster was unveiled and within a year had over ten million users. Illegal file sharing became easier than ever and recording

companies really began to take notice (Witt, Stephen).

Only ten years after Napster was created, the American music industry’s value had been depreciated to half of what it was originally worth in 1999 (Goldman, David) and the loss of cash came from the decline in record sales and popularity of Napster. Within moments of Napster’s debut, music had gone from about 15 dollars an album to absolutely free. This was catastrophic for the people behind the music. Pirating made music virtually worthless and no one seemed to have an answer to the problem. Finally, in the years of 2007 and 2008, streaming services began to emerge as saviors of the music industry (Gil, Lauren).

The incentive of these companies was to make already free music more valuable to the listener. They did this by creating an enormous database of music that was quick and easy to access. You could find almost any song in the library and have it either downloaded, playing, or both within seconds.

With added features such as the ability to friend other users, music streaming really started to gain traction in the UK (Spotifysehr).

Unfortunately, music streaming hasn’t been doing much else in the past couple of years as it’s worked its way across the world to the United States. Their biggest downfall is that they’re losing profits, not only for themselves, but for the artists as well. Spotify is currently the first streaming company to attempt an IPO, and without it they might have hit rock bottom already. In the absence of an IPO (the ability to sell shares on Wall Street and use the money from those shares) Spotify would have no financial backing. Their income from subscribed users would be no match to the 70% payout they owe to the three major labels: Universal Music Group, Sony Music Entertainment, and Warner Music Group (Resnikoff, Paul). In other words, if Spotify doesn’t turn around last year’s 194 million dollar loss into profit, they might have to consider filing for bankruptcy in the near future (Quora).

The reason the 100 million user company isn’t making any profit is because the business model simply

“So live Streaming I don’t know its um.. It kinda cheapens everything. It does cheapen everything, it makes it less outstanding” -Charlie

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doesn’t work. The cost of operation is too high in comparison to the revenue they make. The company generates revenue from three sources: subscribed users, unsubscribed users, and commercials. Their payout to licensing is up to 70% and the other 30% goes towards the cost of operations such as data center systems, personnel, and facilities. Whatever is left over is profit. However, this left over revenue is nonexistent, meaning that they owe money to whomever they choose to borrow from (Mitra, Sramana). As of March 29th, 2016, Spotify had to raise over $1 billion in convertible debt with Wall Street investors in order to remain operational (Macmillan, Douglas).

So what does this all mean? In order to stay operational and make a profit, Spotify has to make more income. In recent years they’ve tried to lower their payout to licensing but they haven’t been successful (Ingham, Tim). In fact, their most recent contract has actually expired and Spotify is currently going month to month with these same licensing owners. It seems to be that the only viable option is for Spotify to charge more or find other means of revenue.

Daniel Ek, head of the 8.4 billion dollar company, doesn’t seem to happy with this approach. Ken Parks, Spotify’s chief content officer and managing director states that, “The problem is Daniel… [He] is so evangelical 6

about the process, you can’t change his mind.” Having personally argued with Daniel, Parks gives an insightful view on flexibility within the company. (Levine, Robert) Parks isn’t the only one who shares this opinion of the streaming company. Universal Studios Chairman/ CEO Lucian Grainge gave his own opinion to reporters at the Code/Media Conference in April of 2015.

Grainge remarked that on-demand streaming was “not something which is particularly sustainable in the long term.” Just days later, Sony CEO Doug Morris said that “in general, free is death.” (Levine, Robert) Spotify’s current situation is simply history repeating itself. What Daniel Ek doesn’t seem to be aware of is that there are consequences to borrowing such large amounts of money without revenue increasing at a promising rate. SpiralFrog was a company with a similar business plan that lasted from September 2007 until March 2009. With an identical “freemium” model (the exchange of unlimited access for a flat rate monthly fee), SpiralFrog failed after only two years and a total of over 9 million borrowed dollars within its last couple of months. While this business was much shorter lived and probably not as developed as Spotify, the trendy music streaming service still had the same deal to offer under all the gimmicks: free music. This should really make people wonder if those ten dollars a month are enough

to keep the ship afloat, especially after they’ve borrowed almost 10 times as much as SpiralFrog did before they croaked. The fact that Daniel Ek seems to be ignoring the precedents of streaming failures before him only seems to guarantee that Spotify will eventually follow suit.

However, Ek’s loss will be none compared to what some of Spotify’s streaming artist have already lost.

Bono, lead singer of the band U2, said himself, “A decade’s worth of music file-sharing and swiping has made clear that the people it hurts are the creators — in this case, the young, fledgling songwriters who can’t live off ticket and T-shirt sales like the least sympathetic among us — and the people this reverse Robin Hooding benefits are rich service providers, whose swollen profits perfectly mirror the lost receipts of the music business” (Hewson, Paul David).

Published in the New York Times opinions page, Bono gives a passionate opinion as to how the distribution of music has really affected artist over the past couple of years. His quote not only gives a clear understanding of how pirating has affected artist but streaming companies like Spotify have deteriorated the value of music. Not only is this clear with artist, a lot of consumers are well aware of this as well. A representative of the pre-streaming generation, Charlie Elman, was a Grateful Dead fan and often followed the band on tours in his younger years.

Mr. Elman says, “there are so many people that rip off their [artists] music and don’t pay for it... I mean you can get it in so many places- YouTube, Spotify, Pandora.

So much of it is available for bootleg.” For this reason artists have become infuriated with companies like Spotify. Many artists prefer to be compensated for their work than be advertised through streaming.

Spotify is a perfect example of this since some artist streaming with them are blatantly discontent. Singersongwriter Beck explains, “Streaming is inevitable, it’s something that is coming, like it or not… This model doesn’t work, so we have to come up with ways in which people can help us to make music for free, or at least for much less. But the current way isn’t working, something’s gotta give” (Resnikoff, Paul).

In this day and age, only big-name pop stars can live off of their music, leaving non-mainstream musicians to find other means of carrying on. The reason being, that the same pop sound is being put into weekly charts and is being featured on the top of each running playlist. From a business standpoint, what gets put at the top of the charts is what sells. Johnny Marr, guitarist of The Smiths observes, “... My problem with some of the big streaming platforms is that, I think, by definition, they are going be more catering towards getting you to press the button on music that you already know. I don’t think that it’s 7

“you see Musicians with their tip jars, trying to make a name for themselves and Then When they get famous they’re still asking for fucking cash in the jar, it’s bullshit. Sorry that’s my Opinion.” -Rodge

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in their economic interest to take to many chances on completely unknown music…” (Butler, Ed) For this reason many alternative bands in sub genres today have decided to exclude themselves from streaming communities because they don’t want to be a part of the hierarchy. Among this list are bands such as Dr. Dre, Tool, and Beyonce– revered and respected amongst the majority of musicians from any genre. Some more popular artists have even taken their music off of Spotify completely after seeing how much they were being paid by the streaming company.

Adele accounts, “I don’t use streaming. I buy my music. I download it, and I buy a physical [copy] just to make up for the fact that someone else somewhere isn’t. It’s a bit disposable, streaming” (Lansky, Sam).

Adele’s individual story is synonymous with Taylor Swift’s in that they both refused to release their albums to Spotify for similar reasons. Both Swift and Adele wanted their music to be more respected and worth more than free. They felt their art had value and therefore could be given a set price. Swift wrote to Apple about their most recent promotion for Apple Music; free streaming, while artists went unpaid for three months. Swift wrote in a letter to Apple, “This is not about me…This is about the new artist or band that has just released their first single and will not be paid for its success. This is about the young songwriter who just got his or her first cut and thought that the royalties from that would get them out of debt. This is about the producer who works tirelessly to innovate and create…” Taylor ended her letter to Apple with a striking comparison between the two industries. She wrote, “We don’t ask you for free iPhones. Please don’t ask us to provide you with our music for no compensation” (Swift, Taylor Alison).

In this same light, we can learn from these multiple accounts and passionate entries that we should treat artist like a Boy Scout treats there campsite: with respect. This respect can be paid in many ways but should have limits. In the same way a scout can admire the beauty in a solemn forest, there is beauty and reverence in being able to appreciate a piece of music no matter what genre. With this appreciation comes what any good samaritan would call a responsibility: to give back. According to James A. Forbes, “A Good Samaritan is not simply one whose heart is touched in an immediate act of care and charity, but one who provides a system of sustained care,” and as my own scoutmaster used to say, “always leave a campsite cleaner than when you found it.” Hopefully in the end we can all agree that artists should and can be left with a little more than when we first find them.

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Butler, Ed. “BBC World Service - Business Daily, Can Online Streaming Services Sustain the Music We Love?” BBC News, BBC, Feb. 2015, www.bbc. co.uk/programmes/p033l4mh. Accessed 27 Apr. 2017.

Gil, Lauren. “History of Music Streaming.” Sutori, Sutori, 25 Apr. 2016, www.sutori.com/story/history-of-music-streaming. Accessed 27 Apr. 2017.

Goldman, David. “Music’s Lost Decade: Sales Cut in Half.” CNNMoney, Cable News Network, 3 Feb. 2010, money.cnn.com/2010/02/02/news/companies/napster_music_industry/. Accessed 27 Apr. 2017.

Hewson, Paul David. “Ten for the Next Ten.” The New York Times, The New York Times, 2 Jan. 2010, www. nytimes.com/2010/01/03/opinion/03bono. html. Accessed 27 Apr. 2017.

Ingham, Tim. “Spotify Is out of Contract with All Three Major Labels - and Wants to Pay Them Less.” Music Business Worldwide, Music Business Worldwide, 23 Aug. 2016, www.musicbusinessworldwide.com/ spotify-contract-three-major-labels-wants-payless/. Accessed 27 Apr. 2017.

Lansky, Sam. “Adele on Motherhood, Social Media and Breaking Records.” BBC News, BBC, 21 Dec. 2015, www.memeorandum.com/151222/p30.

Accessed 27 Apr. 2017.

Lansky, Sam. “Adele Time Cover Story: Streaming, Motherhood, Beyonce.” Time, Time, 21 Dec. 2015, time.com/4155795/adele-time-cover-story-interview-motherhood-25/. Accessed 27 Apr.

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Levine, Robert. “Billboard Cover: Spotify CEO Daniel Ek on Taylor Swift, His ‘Freemium’ Business Model and Why He’s Saving the Music Industry.”

Billboard, Billboard, 5 June 2015, www.billboard. com/articles/business/6590101/daniel-ek-spotify-ceo-streaming-feature-tidal-apple-record-labels-taylor-swift. Accessed 27 Apr. 2017.

MacMillan, Douglas. “Spotify Raises $1 Billion in Debt Financing.” The Wall Street Journal, Dow Jones & Company, 29 Mar. 2016, www.wsj.com/ articles/spotify-raises-1-billion-in-debt-financing-1459284467. Accessed 27 Apr. 2017.

Mitra, Sramana. “Latest Opinion & Analysis.” Seeking Alpha, Seeking Alpha, 8 Mar. 2017, seekingalpha. com/articles?filters=internet-software-services.

Accessed 27 Apr. 2017.

Newman, Melinda. “The Invention of the CD.” PBS, Public Broadcasting Service, 27 May 2004, www. pbs.org/wgbh/pages/frontline////////// shows/music/perfect/cd.html. Accessed 27 Apr. 2017.

Quora. “The Streaming Music Industry Has Some Serious Financial Puzzles To Solve To Become Profitable.” Forbes, Forbes Magazine, 6 Sept. 2016, www.forbes.com/sites/quora/2016/09/06/ the-streaming-music-industry-has-some-seriousfinancial-puzzles-to-solve-to-become-profitable/.

Accessed 27 Apr. 2017.

Resnikoff, Paul. “16 Artists That Are Now Speaking Out Against Streaming Music.” Digital Music

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News, Digital Music News, 6 Feb. 2017, www.digitalmusicnews.com/2013/12/02/artistspiracy/.

Accessed 27 Apr. 2017.

Resnikoff, Paul. “Is Spotify Going Bankrupt In 2017?

Wall Street Delivers Another Red Flag.” Digital Music News, Digita Music News, 10 Feb. 2017, www.digitalmusicnews.com/2017/02/02/spotify-bankrupt-ipo/. Accessed 27 Apr. 2017.

Spotifysehr. “Spotify Now Available to Everyone in the UK.” News, Spotify , 10 Feb. 2009, news.spotify. com/no/2009/02/10/spotify-now-available-toeveryone-in-the-uk/. Accessed 27 Apr. 2017.

Sreenivasan, Hari. “Recent Video.” PBS, Public Broadcasting Service, 6 Feb. 2015, www.pbs.org/newshour/videos/. Accessed 27 Apr. 2017.

Stein, Evan. “In-Depth Data for the Music Industry.”

Quantone Music, Medicine Man , 26 Apr. 2016, quantonemusic.com/. Accessed 27 Apr. 2017.

Stein, Evan. “In-Depth Data for the Music Industry.”

Quantone Music, Medicine Man , 26 Apr. 2016, quantonemusic.com/. Accessed 27 Apr. 2017.

Swift, Taylor Alison. “To Apple, Love Taylor.” Taylor Swift Web [TaySwift.com] + Your Biggest Fansite for Everything Taylor Swift / Taylor Swift News, Pictures & More, Tumblr, 21 June 2015, www.taylorswiftweb.net/. Accessed 27 Apr. 2017.

Witt, Stephen. “The Man Who Broke the Music Business.” The New Yorker, The New Yorker, 19 Apr. 2015, www.newyorker.com/magazine/2015/04/27/the-man-who-broke-the-music-business. Accessed 27 Apr. 2017.

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Se ba s t ia n Ma rul a nd a is a n e l e ve n t h g ra d e Mount a in Vie w Hig h s c h o o l s t ud e nt . He is a l so a n e nt h u s i a s t i c s t ud e nt he re a t Fre e s t y l e A c a de my .

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by Se ba s t ia n’ s d re a m s of be c o mi n g a m usic ia n a f t e r c ol l e g e . He c u r r e n t l y s pe nd s a l ot of his t im e pra c t i c i n g a n d pe rf orm ing m ul t ipl e g e nre s o f mu s i c .

Se ba s t ia n is l ooking t o f ol l o w h i s a s pira t ions of be ing a m us ic i a n a ft e r hig hsc hool a nd we l l int o his l a te r y e a r s .

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