Business Matters: Another Indie Sours on Streaming Services, But How Solid Is the Math?
Business Matters: Another Indie Sours on Streaming Services, But How Solid Is the Math?

Another Indie Sours on Streaming Services, But How Solid Is the Math?
-- Another indie label has announced it is leaving streaming services due to their low payouts from the music service. Projekt Records founder Sam Rosenthal explained at the Projekt website that he instructed the label's distributor, IRIS, to remove its catalog from "Spotify, Grooveshark, Rdio etc."

"Artists would like fair compensation for our creations. I believe in a world where fans value the music they enjoy, and are willing to put some of their money towards it," Rosenthal wrote in a post at the label's website. "Paying artists is THE RIGHT THING TO DO. There is value to music, just as there is cost to creating music. Personally, I believe in creativity, art, value, doing the right thing."

The numbers in Rosenthal's post will be familiar to frequent readers. He explained that his decision is based on the $0.00029 per stream Spotify pays out to labels. This is a figure that's been reported widely in the blogosphere since a fantastic infographic on the various artist royalty rates made the rounds in 2010, and it's a figure most associated with Spotify. There is no indication that Projekt had been receiving $0.00029 per stream from on-demand services.

Payouts are actually in flux. Labels have received a wide range of payouts from Spotify since its launch in 2009. Some are better than $0.00029, some are worse. And a single royalty statement can show multiple payout rates. For a look at streaming payments over the years, read posts at Digital Audio Insider, and The Cynical Musician.

Another familiar number in Rosenthal's post was the $169 generated by 1 million plays of Lady Gaga's "Poker Face" over a five-month period. This was reported in The Guardian in April 2010. But this may not a good number for a record company to cite. The claim of $169 in royalties was made by British Academy of Songwriters, Composers and Authors (Basra), which implies the amount in question covered performance royalties paid to the publisher.

So what does it all mean? There are likely to be holdouts from on-demand services just as there are holdouts from download stores. Some labels, especially ones that are small and require the financial support of loyal customers, won't want to risk losing CD, LP and download sales because once-loyal customers found a cheaper alternative. Labels need more than streaming revenue to survive. Until the business changes enough so that a small label can live without some or all of those purchases, music's transition to the cloud will be anything but smooth sailing.

Don't miss Billboard's FutureSound Conference, taking place November 17-18 at Terra in San Francisco. FutureSound will feature keynotes from the top minds in investment, technology and music today; presentations that will offer specific solutions structured around answering the most pressing questions; and workshops.

Are Swedes Souring on Spotify?
-- More than two in five Spotify users in Sweden plan to consider an alternative for music streaming, according to a survey by Mediavision that a Spotify representative called "fundamentally flawed." If true, the survey's findings point to consumer dissatisfaction with the company's decision to scale back the amount of time nonpaying users could use the service. The survey found that 43 percent are planning to replace Spotify's service in favor of alternatives like YouTube while 48 percent will leave for another streaming service.

There has already been an indication that support the general finding of the Mediavision survey. An August report at MusicAlly claimed Spotify lost 1.6 million weekly active free users but gained 520,000 paying subscribers in the four months after implementing limits on free users.

Further evidence the change may have benefitted Spotify's subscription count came last week when the company announced it had surpassed 2 million paying customers, up about 400,000 since July (the month of its US launch). (The Local)

Exiting WMG Digital Head Michael Nash Says Music Biz Has 'Finally Figured Out Free'
-- Some indie labels may not be thrilled about payouts from subscription service with freemium business models, but outgoing head of digital at Warner Music Group believes the music industry "has finally figured out free."

Michael Nash told CNET the recent spate of freemium licensing agreements reflect labels' belief that today's free services have the right goal: paying customers. Previous attempts - such as iMeem and Spiral Frog - offered free music for the sake of free music. "What we're looking for now is for free to drive engagement with subscription services."

Two weeks ago, Mog and Rdio each announced they will launch free versions of their subscription services. Spotify already offered a free tier - although free listening was curtailed before the service launched in the US - and Deezer has a similar freemium model in France and the UK.

Nash also painted a picture of a better environment in which content owners and digital startups negotiate. "I think infringement as a negotiating strategy, a point of trying to drive a licensing discussion, doesn't have a great track record," said Nash. "That's why companies such as are talking to everybody. That's the posture you're going to see in the future."

That's very true - for a couple reasons. One could argue that labels have litigated their way to this improved position. Had they not taken a firm stand against services that thumbed their noses at their obligations to pay rights holders, today's climate could very well be very different. But it's also safe to say labels have become more engaged and open-minded in recent years. The result is sense of collaboration between rights holders and entrepreneurs that is the encouragingly strong. ( CNET)

Holiday Hiring Way Down at Best Buy
-- How's the 2011 holiday season shaping up? Well, Best Buy has cut holiday hiring by half, according to Reuters. The retailer is hiring 15,000 seasonal employees, down from 29,000 in 2010, and will have its permanent employees work overtime as needed.

Expecting the economy to make for a tough fourth quarter, the company will lure value-conscious shoppers by offering to match any lower prices offered by its brick-and-mortar competitors from November 13 to December 24. "The consumer is being really careful about where he or she is spending the dollars, and I think that will continue through the holidays," said CEO Brian Dunn. ( Reuters)