August 11, 2011 at 11:45 am

Spotify Defends Payouts to Artists, Music Industry

spotify indie labels

Spotify says it's earning money for artists from fans that wouldn't pay for it otherwise; some indie labels disagree.

To hear some people tell it, Spotify doesn’t pay out enough money to labels. To others, it’s practically the second coming of the music industry, because it harvests at least some money from fans who normally don’t pay anything.

We’ve seen plenty of scuffling over Spotify’s music-licensing payments, which it says exceed $100 million so far. But only two labels appear to have withdrawn their music (so far anyway) from Spotify following its U.S. launch, and they’re both indies: Century Media (home to several sublabels as well as the bands 3 Inches of Blood, Deicide, and Iwrestledabearonce) and Mode Records (Cage, Feldman, Theremin).

Century Media posted an explanation about why it is leaving Spotify so soon after its American debut, saying that while Spotify offers great ways to discover music, it doesn’t pay out enough to artists, which will lead to a “downward spiral” and ultimately many artists hanging up their guitars.

Spotify’s response, below, which we are admittedly a bit late to post, explains that the company has already spent over $100 million on payments. In the past, we’ve noticed that indie labels can be left out of the equation when the big four make big upfront deals with services like Spotify. I complained about the same thing back when MySpace Music launched.

On the other hand, the head of a fairly well-known indie label told me just last week that he’s looking to hire someone or something to track down all the tiny payments due to his bands, because the money comes from so many places right now — Spotify included.

Perhaps the issue at the core of this — aside from any difference in statups’ treatment of major vs. indie labels — is that Century views Spotify as the way music will be distributed in the future, instead of just one of the ways. From that perspective, its noisy refusal to distribute its music on Spotify is actually a backhanded compliment.

Anyway, here’s what Spotify had to say for itself:

We are sorry that Century Media have opted not to offer its music to their fans through Spotify. Spotify has one of the biggest music libraries in the world – of over 15 million tracks – and is committed to offering our users the widest possible selection of music across artists and genres from around the world.

Spotify was launched out of a desire to develop a better, more convenient and legal alternative to music piracy. Spotify now monetises an audience the large majority of whom were downloading illegally (and therefore not making any money for the industry) before Spotify was available.

Spotify is now generating serious revenues for rights holders; since our launch just three years ago, we have paid over $100 million to labels and publishers, who, in turn, pass this on to the artists, composers and authors they represent. Indeed, a top Swedish music executive was recently quoted as saying that Spotify is currently the biggest single revenue source for the music industry in Scandinavia.

Spotify is now also the second single largest source of digital music revenue for labels in Europe (IFPI, Apr 2011). Billboard reported in April that Spotify territories saw an average digital growth rate of 43 percent last year. By contrast, neighbouring countries (without Spotify) saw only 9.3 percent digital growth.

We are very proud of the positive contribution that Spotify makes towards growth in the music industry.