Monday, August 15, 2011

Letter To Mode Records: The Spotify Problem

Hi Mode Records,

I read Mr. Brandt's article on New Music Box, as a fan of contemporary classical music and Spotify, I should like to share some opinions of my own.

Firstly, I totally agree that Mode, and other labels, should get paid properly, so they can keep on making music. The current payment from Spotify is indeed depressing.

However, I don't think leaving Spotify or giving up cloud services all together is a good idea.

Business models aside, there's little doubt that cloud services is going to take over content ownership, the process is inevitable and it's accelerating, after Spotify entered the US market. It's not just an opinion of an early adaptor, it is as nature as CD took over LP, or iPod took over Walkman. To be frankly the concept of content ownership sounds rather alien to me now. Why should people store a copy on their computer, and spend their time to move it around on phones and tablets, when they can simply access it from the cloud anywhere anytime? Personally I agree with die-hard CD/Vinyl fans that owning a physical copy makes me value the music more, but most people always choose what's most convenient for them. As a business you can't tell them "you should keep on buying CDs or MP3s", in my opinion it's time to consider how to adjust your business model to cloud services now.

Have you ever wondered why Alex Ross' The Rest Is Noise sold 200,000 copies, maybe more than any single CD of contemporary works he recommended in that book? And why few people of one million subscribers of The New Yorker ran to the nearest record store to buy a Xenakis CD, after they read Ross's brilliant article on Xenakis, which appeared on the magazine last March? I don't know the answer (though obviously one of the reasons is not everyone is as rich as John Taylor of Duran Duran), but I know that fact isn't going to change in the times that both physical and digital sales are declining, and I see a great opportunity lies ahead: there are many people who never heard of the music they've read about.

Subscription-based cloud services like Spotify let the users access to all kinds of music at ease. What if those one million magazine readers could access to works featured in that article, such as Psappha, a highly addictive piece that has great potential to be a crowd-pleaser, in one click (like all Spotify users are able to do now)? At current payment rates, one million plays generate $3,000 from that single track, not to mention the posiible sales bring in by this "sample". Bear in mind that most of those people would never pay to hear Xenakis without cloud services anyway.

And with Spotify, teenage pop music fans nowadays can explore new music as they please.  A couple of minutes within Jonny Greenwood posted about he'd been listening to George Crumb recently, tens of thousands of fans could start to listen to Black Angels right away. Any IDM/Drone fan who is curious about where did this music come from can listen to Xenakis and Stockhausen to hear for themselve.  Before cloud service, let's be honest, most of them source it from Youtube and illegal p2p networks. I'm not saying getting contents for free is good, but that is a fact and even if piracy could be rooted out from internet (no it can't), I'm afriad most of these curious listener would just give up exploring more music.

You see what's really exciting about Spotify and cloud services is they are, relatively speaking, so young, and full of possibilities. Putting a streaming link into iPad version of The New Yorker and monetizing it is just one of the numerous ideas. Even if Mode can survive solely on a few thousand loyal fans, like in the past 26 years, why not give the new opportunity a try?

The 1/3 penny per stream payment rates is definitely not fair, but I'd assume it's growing, because Spotify's paying subscribers has been growing rapidly in the past two years, from 250k to 1.7 million, and within one month more than 140k US users subscribed to their paid service. So Spotify's income, and accordingly the payment to all labels, should continue to grow rapidly in the next few years at least.

In my opinion what you should try is, to unite with other independent classical/jazz labels, maybe even the majors, to negotiate with Spotify, and ask them to change the pay per stream model. The current one is not fair to labels with longer tracks, because if a 50-mintue 12-track pop album and a 4-track, 50 minute classical album both got streamed once, Spotify's payment to the pop label is triple (12:4) of the classical label. Also note that currently this model seems to be adapted by all streaming services, so it may take some time and effort to change.

I know this may sound aggressive but I do think you should also try to promote your contents on Spotify. In the past you focused on meeting the needs of thousands of contemproray classical fans, it's more like maintaining a small community, where everyone speak the same language. Now the whole wild world is opening up, all kinds of people have the same chance to hear your music, if you want to be take advantage of that, you need to come up with some new strategies. Cage Against The Machine? Xeankis Remix contest? Inviting Jonny Greenwood or Bjork to review your new release and post a Spotify link on their Facebook walls? Why not?

At the same time, you can also maintain a regular CD club for fans who just won't listen to music on computers, selling Flac online (ideally as a subscription, like Resonus Classics), or even manufacture some collectable handcrafted CD-R/Vinyl (pre-order only so you can control the cost). I'm not a businessman, but it looks to me that there are many possibilities worth trying, than leaving Spotify now.

Right now only about one third of Mode's catalog is available on Spotify, I don't know if the rest two thirds moved more units than the Spotified ones. If the sales level are the same, would you please consider making more contents available?

I hope you can take my opinions into consideration, before you make your decision.  And I hope this email can be forwarded to Mr. Brandt. Thank you.

Music is the best.


Postscript: In the end, the essence of the music business is to meet people's demand for music, in a monetized way. Before the cloud, people buy copies. Now that more and more people start to realize they don't need copies anymore, and it's foreseeable that, in a few years, the cloud would be able to stream in lossless quality and offer multimedia information like booklets and musician biographies. Simply put, the cloud will shortly exceed CDs/Digital copies in user experience, in every way. In my opinion the industry needs to come up with a new way of making profits from the cloud, instead of running away from it. Currently Spotify is the cloud service with the most hype, and personally I think it's the most technically advanced one, so it's in a good position to become one of the dominating ways of how people consume music. I hope niche labels can give Spotify more chance, to experiment with the opportunities it offers, instead of cutting it off at this early stage.

And I also hope Spotify can show some goodwill to niche labels with longer tracks, it might not be up to Spotify to change the pay per stream model, which is adapted by all streaming services that I know of. Here's an easy alternative: just count one stream of longer than 10-minute tracks as two streams, longer than 20 as four. It doesn't require Spotify or the users to pay more, but makes the payment model more fair. At least Spotify can let the labels know they are open to negotiation, and sincerely "want to offer Spotify users all of the music in the world", in a sustainable way for both them and the music makers.


  1. You wonder "Why should people store a copy on their computer, and spend their time to move it around on phones and tablets, when they can simply access it from the cloud anywhere anytime?" The answer is simple: because Spotify, as so many other online services, may die one of these days, and then all those wonderful playlists and online resources will be gone. My local copy may also vanish one day (bad error in hard disk, virus, etc.), but it would be my fault if I did not keep a backup, and anyway, it is always up to me only to decide if my copy stays local in a hard disk, preserved in the cloud, or burnt in a CD. I consider Spotify like a rental service: I get the music for a small price for as long as Spotify exists and I wish to renew my subscription, but I am not bound by it.

  2. I agree that Spotify or any other could service may die one day, after all, nothing lasts forever. But I firmly believe cloud services will take over content ownership, and personally I'd rather spend my limited time on listening to music, other than obtaining copies, backing them up, moving them around etc.

    I see Spotify as an innovative music service that makes content ownership no longer necessary, not a rental shop that give me temporary content ownership. What I really want is to appreciate a piece of music, not owning a copy of it "forever". Do you want to record a copy for every TV show you watch on cable TV/Hulu/Netflix? Yes good music deserves many repeated listens, but technically speaking, owning a copy of music is not more nature or more necessary than owning a copy of videos, when users can access to any music anywhere anytime, as easy as watching news on TV/phones.

  3. Interesting debate. I am much more supportive of Ulysses' point of view. To my mind, the cloud is the future - simply because the cloud gives me hugely greater greater convenience of access to music. I actually own many hundreds of classical CD's, yet I find myself listening to recordings that I already own through Spotify. Why ? Because it's convenient. I can listen to that same recording in many places, in many ways. I dont need to be tied to a round bit of metal.

    Yet the music industry seems to be desperately trying to resist change, and hang on to an old revenue model. Let's complain about piracy; lets complain about unfair payment schemes etc. But this is all looking in the rear-view mirror. SURELY the energies would be better spent working out a fair and reasonable model for the future.

    The growing consumer preference for cloud based services is pretty clear. What needs to happen now is that instead of demonising either the listeners (piracy moans) or the services (unfair payment moans) there is a need for the content developers and the streaming services to work together, and evolve a model that allows everyone to make a fair profit. It may not be easy, but it seems to me to be the only way to make constructive progress (BTW I like the idea of a "co-operative" of small labels to concentrate bargaining power.

    On a purely personal level, Spotify has revolutionised my music listening - and I know that I wont be looking back.

  4. Actually I agree that the cloud is the future - I just happen to believe that it is OK to keep local copies as well, at least of your most beloved recordings, as a safeguard if one day it gets too cloudy and dark and you cannot see them any more... And probably Karajan will always be available somewhere, it may well happen if we are talking about rare recordings or obscure recording labels.

  5. I don't agree with you, Jaume. I think that the sound cloud is here to stay. It is such an amazing concept and once everyone tries it, I don't think its loss would be acceptable. It's simply one of those things that you do not think you need, but once you have experienced it, you wouldn't know how you were able to live without it in the first place.

  6. If the cloud does end up being the solution, I think we have a long way to go. If you look at the numbers of subscribers to different services like Spotify, they are a tiny fraction of a fraction of the number of music listeners. On the one hand, people are very used to owning music, and that will take a while to change. On the other hand, today's young generation is used to just downloading anything they want, without paying for a subscription.

    I think the cloud does have a future, but we're years away from it being really usable. Ideally, a cloud should not only provide music from a subscription service, but also access to music I own. This latter idea is sort of what Apple will be doing with their iTunes Match service, but that will not be for streaming, only downloading, making it more or less unusable.

    One of the biggest problems is that people who are paying from, say, $40 to $100 a month for a data contract for a phone, plus similar amounts for Internet access, don't want to pay even another $10 for streaming music. Remember, these phone costs are new, and they're eating into people's entertainment budgets. Unless these costs come down - or unless phone companies make deals with streaming services to include them in packages of, say, voice, data and internet services, I don't think streaming will get off the ground quickly.