More than three months have passed since Thom Yorke and Nigel Godrich, his bandmate in Atoms for Peace and the producer of numerous Radiohead albums, announced they had pulled their songs from Spotify. Aided by additional public comments from Yorke, the topic has had a surprisingly long shelf life.
Each statement by Yorke about Spotify -- he targets the popular service more than the broad category of music subscription services -- creates ripples in the media and the music community. Just last week, the Guardian has run pieces by David Byrne, who thinks along the lines of Yorke, and Dave Allen, who disagrees with Yorke and Byrne.
But Yorke hasn't attracted many supporters. The reason may be his messaging rather than his message.
The basic tenants within Yorke's various statements seem quite sensible. He recognizes the revenue potential in purchases but questions the revenue potential of streaming services. He's concerned that streaming revenues won't be able to support the creativity of young, emerging artists. And he doesn't want to see another gatekeeper standing in the way between artists and their fans.
These are concepts I think most people can appreciate. Yorke could improve his message by taking a different didactical tact. Here are four areas to focus on.
1. The uncertainty of the subscription model. Much of the industry, from executives to investors, have a great amount of optimism and certainty about the business model. (For what it's worth, many rights owners also have equity in some streaming services.) One such person is respected industry veteran Tom Silverman, who has written and talked about a "$100 billion music business" built on massive adoption of subscription services (he means the record business, not the entire business of music). "Although combined music-streaming services may only have 4 million US music subscribers today, 50 to 100 million are clearly possible," Silverman wrote in an op-ed for Billboard earlier this year.
Where would subscription services get 100 million U.S. subscribers? The leading theory is services would form partnerships like the one just announced between mobile giant Telefónica and Rhapsody International. The deal, which gives Telefónica a stake in the international subsidiary of Rhapsody, gives the service access to more than 300 million mobile phone subscribers. Partnerships could theoretically turn subscription royalties into a massive revenue stream, but mainstream penetration is far from certain.
2. Cannibalization. The word "cannibalization" gets attention. It's a scary term that suggests a new business model can have unintended or undesirable consequences. Consider what's happening in the United States. In 2013, revenue from new business models will also need to replace lost track revenues (tracks are down 4% through October 14th, according to Nielsen SoundScan) as well as lost CD sales (CD sales are down 13%). Digital album growth has slowed to a crawl and will probably turn negative next year. Digital album sales are up just 2% this year compared to 16% a year earlier. At this moment it looks like access models are filling the void left behind from declining purchases, but nobody knows how long that trend will last.
On a related note, Yorke should explain why he allows his music to stream on the likes of YouTube and SoundCloud but not subscription services like Spotify. I don't know Yorke's reasoning, but here's a common way of thinking: YouTube and SoundCloud have either additive or neutral impact on sales while subscription services have a negative impact on purchases because they replace consumers' purchasing behavior. By better explaining his different approaches to the various music services, Yorke could clear up confusion that detracts from his overall message.
3. The artist-fan connection. Yorke dislikes that subscription services are another business model that creates a barrier between artist and fans. He has certainly put his money where his mouth is: Radiohead has been an innovator in creating a direct-to-fan sales channel. One could argue that a service like Spotify helps create and strengthen the artist-fan connection because it provides a legal platform to experience the artist's music. But Yorke is clearly frustrated by the arrival of more, powerful intermediaries. Technologies have been built that allow artists to communicate and sell directly to fans. And he's hardly alone in his desire for direct-to-fan platforms to be more widely embraced.
4. The need to support artists. Yorke's criticism here is hardly unique. Subscription services have been widely criticized for the royalties paid to labels and artists. Some of the criticism is unfounded -- it strikes me as fear of small numbers more than anything else. But Yorke's concern is valid. New album needs to recoup costs. The timing and amount of streaming royalties means an album hits breakeven later than it would from purchases. Yorke is not alone here. Fugazi's Ian MacKaye agrees. "I encourage all people to accept the mantle as patron of the arts, to pay some money to help artists make things," he told Mother Jones last year.
Yorke is no luddite but is often portrayed as a middle-aged, out-of-step musician that makes his fans work harder to hear his music. But the matter really boils down to Yorke's lack of enthusiasm or optimism about a new generation of music services. He doesn't believe they have viable business models. He doesn't believe they offer the best path forward for musicians. His opinions run counter to the momentum of the industry, years of market research and the financial bets of private equity and venture capital. Put simply, Yorke clashes with the collective wisdom of the music industry. That doesn't necessarily mean he's wrong. But it means he has the burden of taking an unpopular position.
Numbers can show the differences between purchases and streams. A $10 purchase equals a certain and immediate payment -- as well as an opportunity to forge a direct relationship with a fan (as any marketer will tell you, an email address is worth something, too). A streaming royalty of 0.5 cents requires 2,000 streams, over an uncertain period of time, to equal $10 -- but with no direct relationship with the fan.
Above all, be sure to use the right numbers. As Jay Frank recently noted as his blog post "David Byrne: Great Musician, Terrible Mathematician," bad numbers can only hurt your argument. A general rule of thumb: don't confuse songwriting royalties with sound recording royalties.