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Spotify: Good for music lovers, bad for musicians?

Spotify music streaming is hugely popular in Europe, and now it’s live in the US. But what does Spotify offer the musicians that create that music?

By / July 20, 2011

Spotify reached American shores this week.

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The popular European music service Spotify is live in the US, launching this week to popular fanfare and a huge amount of blog buzz. But of course, music lovers in the US already have quite a few options when it comes to music-streaming services. Recommendation services such as Pandora and Last.fm occupy slightly different niches, as do nascent cloud offerings from Apple, Google, and Amazon. But Spotify more resembles streaming services such as Rhapsody and Rdio. How does Spotify stack up?

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Spotify has two major advantages over similar services. The first is its gargantuan library of more than 15 million songs, which includes the catalogues of all four major record labels and lots of indies, too. (By way of comparison, Rdio offers about 7 million songs, and Rhapsody 10 million.)

Spotify’s second advantage is the streaming flexibility it offers to users. Anyone can use the client on a Mac, PC, or Linux machine. In addition, customers willing to shell out $10/month for a premium account can enjoy Spotify apps not only for iOS and Android, but also for webOS, Symbian, and even older Windows Mobile phones.

It’s clear that Spotify has enough strengths to present a compelling option for music lovers. What about the musicians themselves? How does Spotify’s expansion affect them?

There are two things to consider here. The first is how much of a kickback artists and labels get from songs streamed on Spotify. It’s not much. Last year, Sam Leith at The Guardian reported that artists received as little as as 1/10th of a cent per stream. By comparison, artists and labels usually collect about 70 percent of the amount paid for a download from iTunes or a similar service – that’s 70 cents, assuming the track costs a dollar.

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So, on a per-song basis, the numbers aren’t great. But it’s also worth considering the potential of Spotify, and services like it, to curb piracy by offering an accessible, legal alternative to downloading files from torrent services. In an interview with The New York Times on Wednesday, Spotify founder Daniel Ek made just this argument: “People tend to get more into the experience, and they tend to find new music and build larger collections that they want to take with them. And therefore, they also pay more for music.”

Although Spotify’s royalties per song streamed are small, those royalties have the potential to add up as streams multiply. And apparently that’s been working in Europe: the International Business Times adds that Spotify is the single biggest source of revenue for the music industry in some European countries. (IBT didn't name which countries.) If Spotify gains traction, it’s not unreasonable to expect that this upstart could become a major new source of revenue for artists and record labels stateside – through both direct royalties and increased album sales as a result of increased exposure.

What are your thoughts on Spotify? Good for music lovers? Good for artists? Let us know how you’re feeling in the comments.

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