Thursday, December 9, 2010

My Guesswork On What's Going On Between Naxos And Spotify

Yesterday I read an unexpected and dreadful news that Naxos and ECM were threatening to leave Spotify. If it happens, the classical library of Spotify would be savagely damaged: both labels are specialized in their sub-genres and offer the only available recordings for many (often unfairly) obscure works.

Here are some facts: 1, Spotify is now making more money for rightsholders than Apple's iTunes Store, according to label sources, including UMG and Sony Music in Sweden. 2, Yesterday Spotify CEO Daniel Ek announced that they now have 750,000 paying subscribers. The number is tripled since Naxos joined Spotify. 3, By doing a few searches in Spotify, you will see that Naxos is clearly the most popular classical label in Spotify. I guess this has something to do with the fact that Naxos use the composer names to tag their recordings. A curious layman who wants a taste of Beethoven might not be able to choose between Kleiber and Karajan, but more likely to pick up a Beethoven symphony played by "Ludvig van Beethoven".

Hence raises the question: why Naxos is unhappy then? To be more precisely: why Spotify is not making enough money for Naxos in Sweden, like they are doing for UMG and Sony?

I guess the possible reasons are: 1, Spotify never revealed the details of how they pay the labels. If I spend 80 minutes to listen to a four-movement (track) symphony on Spotify, then I listen through a 5-track math-rock EP in 20 minutes, how do Spotify split my money for these two labels? 80:20 or 4:5? This is a very crucial element for classical labels, and if Spotify is using the latter paying mode, by all means they need to change.

2, Classical music still holds an amazing 5.5% market share of the recorded music sales, if Naxos and other classical labels could get 5.5% of Spotify's whole payout to labels, I guess they would be happy. But I'm afraid even if the paying mode is adjusted correctly by listening time, they might still not be getting that share. Why? A curious listener might buy a Naxos Best Of Chopin on a whim, so he contributes to the 5.5% share, but it's also very likely that he listens to the Naxos disk through once and then plays the new Kanye West album which he bought with the Chopin, all day long. It is a hypothetical example, but it might not be far from the truth. Popular music fans are more likely to give repeated listens to the music they purchased, than casual classical fans. When this comes to Spotify, it simply means that no matter how you calculate the royalties, classical labels would get less share than they have in physical sales. Classical music's identity crisis is the result of our music education, not the fault of Spotify. And you can only make the situation worse if you choose to make your music less accessible on technically the best music service in the world.

So what should Spotify do to comfort Naxos and ECM? It's really a big question for the Spotify team. I think at least they should try to make the payment method more impartial to the labels if need be, and transparent to the users (surely Spotify are not obligated to do so, but as an inovative start-up based on a totally new business model, it might a good move to let the users know how they benifit the music makers exactly, becuase when you keep it as a secret, the immediate assumption is often "not so good"), and ask the labels to be a bit more patient. If they chose to join Spotify when they only had 250,000 paying subscribers, there's no reason for them to leave now. Actually, I think Naxos should cherish the fact that their recordings beat all those full-price major classical labels in popularity on a free platform, Spotify, where the Naxos disks' price advantage means nothing. People now love you for the quality and broad range of your music, Naxos, don't fail us, please.

BTW, here's the Spotify playlist: Alex Ross 2010: Most Memorable Recordings (131 track 14 hours). Half of his choices are available. The Nico Muhly recording is another "hidden" album that you cannot find under the composer's name on Spotify. Original New Yorker post here. Enjoy, and looking forward to hear your opinions on the Naxos crisis.

6 comments:

  1. It should be pointed out that it can be very difficult to preview the music on classical CDs as they're the least likely to be sampled on major online stores. iTunes' tagging and search system is so weighted against classical tracks that it's a miracle you can find anything.

    ECM material which is mostly unique is very hard to find as previews, and as a premium label I'm reluctant to buy their stuff on spec. On the other hand they come up with a lot of interesting new material so sample availability might make me buy more.

    If labels are concerned at buy-through rates from Spotify then they may not see the true figures since classical music listeners may want access to uncompressed downloads (or to rip CDs) and use other channels (like Qobuz) for purchases.

    Growing the market for classical music seems to be low on the priority list for many of these labels.

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  2. Comment from Spotify employee Jude, after ECM was mostly gone.

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