Opinion: Spotify vs iTunes vs file-sharing vs Emily White and the ethical battle over music ownership

Published July 15, 2012 by Jeff Becker

Where do we think the future of the music business will go?

This opinion piece piggybacks largely off two outstanding resources that are must-reads.   Thank you to Mr. Justin Colletti of Trust Me I’m a Scientist for his own tremendous research he has shared in his articles and for his reference over to the incredible written work by Mr. David Lowery, via the Trichordist.  I cannot recommend highly enough that you turn off your stereo, close your other browsers and read their articles (that are linked above and at the bottom of this article).  Any fan of a fair and proper reward system for artists and any supporter of proper ethics in the music industry must read these.

Let’s try and answer the big questions

The fair distribution art has many moving pieces:

  1. What does the actual law say about copyright infringement?
  2. What about the consumers (the mp3 generation) who think file-sharing is still OK if they can’t find it on Spotify (i.e., The Black Keys) and they’re too broke or lazy to spend the money on iTunes?
  3. What’s the situation with Spotify and the responsibility streaming services have in payment to artists?
  4. Where do iTunes and other digital download services (Amazon) fit into this?
  5. Can the artists survive off of a streaming-only future that sees iTunes, record stores and physical products become the wasteland?
  6. Isn’t a world where music is paid for on a per-play basis a more equitable one?
  7. How does this the distribution of music play out over the next 3-4 years?
  8. What is the best way for fans to supports artists?

Never before has there been so many means of delivery (download, stream, record stores, online stores, direct from artists, direct from labels, bandcamp, etc) from the artist to the consumer and never before has there been such a struggle for artists to collect payment on their copyrighted material.  It’s a scary mix and one that bleeds ignorance.

Forget ethics for a moment – what does the actual Law say about copyright infringement (for the rippers and file-sharers)

It’s not a sexy question, but it’s an important one.  This small article on the RIAA website says it all (click here):

Making unauthorized copies of copyrighted music recordings is against the law and may subject you to civil and criminal liability.  A civil law suit could hold you responsible for thousands of dollars in damages. Criminal charges may leave you with a felony record, accompanied by up to five years of jail time and fines up to $250,000. You may find this surprising. After all, compact discs may be easily be copied multiple times with inexpensive CD-R burning technology.  Further, when you’re on the Internet, digital information can seem to be as free as air.  U.S. copyright law does in fact provide full protection of sound recordings, whether they exist in the form of physical CD’s or digital files.  Regardless of the format at issue, the same basic principal applies:  music sound recordings may not be copied or distributed without the permission of the owner.

A prickly question for the file-sharing audience (aka: the mp3 ‘Emily White‘ generation) who think file-sharing is still OK if they can’t find it on Spotify or simply don’t want to pay for it on iTunes, etc

If you’re walking 20 paces behind your favorite artist (let’s stick with Dan Auerbach of the Black Keys, for the sake of argument) and you see a $10 cash bill drop out of his coat pocket and onto the pavement.   What do you do?   Do you let it fly away in the wind?  Do you scoop it up and keep it as your own?  Or do you grab it and run to hand it back to him?   Of course you do – it’s his money and you know that you would earn his instant appreciation, gratitude and trust.  It’s the right thing to do.   So then why, behind the protective cave called a laptop would you steal $10 worth of his music that he does not want you to have for free?  That’s the same money he lives on.  The same money only he deserves.  The same money he would keep in his coat pocket.  The same money he needs to make more music.

The mp3 generation (the one that has a 15,000 song library but has only purchased 15 CD’s in their life) that Emily White has now infamously become associated with grew up in a file-sharing and copyright infringement world, spent a couple bucks on iTunes when they absolutely had to, borrowed friend’s CDs to rip, and legitimately own about 0-25% of their music collection.  It’s the generation that enjoyed Kazaa, MegaUpload, Limewire and still wants to use Piratebay  and any P2P or illegal downloading sites that can still breathe.   The same generation that knows it’s copyright infringement but can’t grasp that law “because it’s on the internet” and everything on the internet that doesn’t have a ‘Buy It Now’ button must be free.     Shiver in a corner they would if they had to face the artists face to face.   It’s half-part cowardice and the rest is laziness for the sake of convenience.  I’m not part of that generation, but I’m very close.  I was in my late-20’s when Napster came to life.  I’ve seen 8-track tapes, cassettes, DAT, vinyl, mp3’s and everything else in between.  The mp3 generation unwittingly (at the beginning) have taken advantage of a system (the internet) that grew bigger and faster than it could be policed.   The analogies are easy:  Just because I own a fast car doesn’t mean I should drive 80 on a 55, since I probably won’t get caught.  Just because my bff has a Photoshop CS6 disc on his counter doesn’t mean I should take it home and install it due to the fact that Adobe “is already rich”.  Just because I have a computer with access to file-sharing and ripping doesn’t mean I should steal from the artists that wish to sell the music I enjoy.

So Emily, et al., assuming you would give that $10 of cash back that Dan Auerbach dropped on the sidewalk, why would you then turn around and download his music for free behind his back?  Simply because you can and you won’t get caught?   That’s not a fan and that’s no longer mere ignorance because of a “stint in the 5th grade”.    If you don’t legitimately own 90-100% of your music collection then you’re not doing your part.   It isn’t the government or the artists’ responsibility to impose ethics upon you.  As Mr. Lowery pointed out eloquently, for a generation that in so many ways exceeds the generations prior, why such the moral dropoff on this matter of fairness to artists?

The mystery of Spotify and what responsibility do streaming services have in payments to artists?

No simple answer exists for Spotify after going through all of the mathematical gymnastics.  Is it good for the artists?   Most of me says ‘no, it’s not’, and it doesn’t appear to be headed in a direction that favors the artist beyond its current payout structure.   Careful research implies that the payout structure is not going to get better from a pay per stream perspective until the Spotify audience grows tremendously – if it does.   Spotify’s payout structure is a pitiful compromise as payment.     A great article on trustmeimascientist.com shows that selling an album on iTunes (of which slightly more than $6 out of $10 goes to an independent artist) is approximately 10 times as financially lucrative as a fan listening to your 10 song album 10 times on Spotify.  It’s now a true fact that Lady Gaga was paid approximately $312 (201.53 british pounds to be exact) for her single ‘Poker Face’ to be streamed on Spotify one million times.   That is a ghastly low payment structure for any artist.   It’s an aberration of fairness and a pitiful method of exploiting artists, especially independents.

Independent artists that are most vulnerable to the loss of revenue from file-sharing and are searching for any life vest that would bring them the smallest of rewards.  While Lady Gaga can absorb that appalling payout, most other artists cannot.  The additional exposure Spotify provides to those additional listeners does not equate to the purchase value the artist receives from say, iTunes.  How many people choose to not purchase a single off iTunes because they can stream it for free?  Many, I’m sure.  Spotify does provide vast exposure but when the consumer stops using Spotify as a radio channel and begins using it as their music collection, the situation becomes worse and rapidly so for the artists.  Spotify should not be an owned collection for fans unless they are paying significantly (i.e., more than the $10/mo premium account).  Spotify is an on-demand streaming channel with grudgingly paltry rewards to artists.   Artists that are receiving only 60% of one penny per stream via Spotify are being strong-armed into an unfair deal because when the Spotify pay scale is paired up against file-sharing or Pandora, it’s better.   Well, no shit.   If I take a gun and shoot you in the knee cap instead of the heart that’s better for you too, but it’s still not all that great for you.   The “it’s better than nothing” scheme is great for consumers, nearly catastrophic for small artists.

Where does iTunes and other digital downloads (Amazon) fit into this?

That answer depends on the existence of a record label quite frankly.  Per the #’s provided in Mr. Lowery’s 2012 article:

  • Artists that have a record label receive about $2.05 for each $9.99 album purchased on iTunes.
  • For independent artists that are on their own label and directly release their music through iTunes that dollar value to the artist jumps to about $6.10 out of every $9.99 album purchased on iTunes.

I recall a conversation I had with singer/songwriter/guitarist Eric Johnson of the Fruit Bats (signed to SubPop, and also formerly from the Shins) while we were standing at his merchandise table at a 2011 Fruit Bats performance.  I asked him how he preferred to see fans buy his music and he was quick to point out that if fans couldn’t buy his CD at his shows then iTunes always seemed to be the next best payout.  Perhaps in retrospect he would prefer that we jump to the SubPop site before iTunes, but as Mr. Lowery correctly points out in his article the number of fans that peruse band/label websites has dropped dramatically with the increase of Facebook’s popularity.  The two things most mp3-generationers have open on their computer at any given time is Facebook and either iTunes or Spotify.   Why go to the great SubPop website when you can simply stream it for free on Spotify or quickly buy it off iTunes?  Websites are becoming (have already become) old school.

Can artists survive in a streaming-only future where iTunes, record stores and physical products become a wasteland?

No.   While there is no end in site for iTunes given very recent strong sales figures, they have to be nervous about Spotify.   Per CNN, digital music purchases accounted for 50.3% of music sales in 2011. Digital sales were up 8.4% from 2010, while physical album sales declined 5%.  Given the price advantages for music consumers to stream via Spotify ($4.99 per month to stream unlimited on Spotify) and its integration with Facebook the situation for iTunes, on the surface, would seem shaky in its current state.  Physical product sales will decline further as they are produced in smaller numbers while the competition becomes streaming vs download instead of download vs physical.   Collectors and traditionalists will be able to keep physical purchases strong enough to be no more than a nearly irrelevant novelty.   And that sucks.   Common sense tells us that if streaming becomes the new norm the # of artists that can afford to survive off of the streaming payout structure will dwindle and all of the money will bubble to the top.  If it takes 1,000,000 streams for an artist to earn $312 there is only bad news ahead for independents.  The loss of revenue from physical product sales and iTunes sales will have to be made up for by the increased # of streams on Spotify.  That is unlikely.

Isn’t a world where music is paid for on a per-play basis a more equitable one?

A great article by eatenbymonsters asks this question.  My answer is no.  Music is art.  If I go bowling,  that would be a pay-per-play scheme.  Because bowling is not art.   I can go bowling anywhere.   The new U2 album is a one-time product.  A local band up the street cannot provide me that same product, because U2 creates their own unique art.  Music is like that $200 painting you buy at the local art festival.  You don’t pay each time you look at it on your wall.  You own it, it’s yours – just like owning music should be.   If you look at that painting just once in your lifetime you still can be proud that you own it.  It’s worth $200 if you look at it once or 5000 times. You don’t pay a dollar each time to simply glance at it.  If you bought an original Sgt. Pepper on vinyl and choose to keep it pristine and only listen to it once you still own it and there is equity and value in that ownership.   Why should you be required to listen to ‘Strawberry Fields Forever’ x number of times in order to give John Lennon the money he’s asking from you to own his art?   Unlike a museum that allows you to come glance (i.e., stream) at Monet paintings for $20 a day, those Monet paintings are not for sale.   Where as the music from artists is for sale.   John Lennon would say “you pay me $15 to fucking own my art, and I don’t give a shit if you play it once or 20,000 times”, and he would be right!   Huge difference, and an important one.

How does the distribution of music play out over the next 3-4 years?

Look for iTunes (and later on, Amazon) to ultimately offer a Spotify-style streaming model, particularly given the enormous relationship and influence Apple has with record labels.   Given the talent at Apple HQ we can look for Apple to out-Spotify Spotify with a better product in the next two years.  The future of music delivery will see physical sales remain a novelty while digital download sales dwindle over the next five years as friends and family stream more and more on their mobile devices and tablets.  Record labels will spend time sorting out the mess between download sales and streaming while nearly every artist on the planet finds a way to become independent and stay above water by cutting out the record label share.  Artists will continue to promote sales of their music via their Facebook page – pointing fans to Bandcamp or their own website for download – circumventing, as much as possible, the monsters of iTunes, Amazon and Spotify.

What is the best way for fans to support artists?

So you’re taste-testing your new music on Spotify and now you’re willing to spend some money.   Where do you spend that money for the most impact?   I’ve asked several artists this relatively new but ever-changing question.  This list is not scientific but close to reality in most situations.

#1   best option:  Buy it from the artists directly off their website or from their bandcamp download site.  Even better yet?  Buy it at their concerts.

#2   Your local record store.   The dollar value to the artist is about the same as iTunes but the bands probably have a lot more sentiment to the local record shops that support and promote their records and shows.

#3   Online independent record stores (insound.com for example) or directly from the band’s label.

#4   iTunes/Amazon download.  As much as they rule the digital download world with no risk they still pay out over 60+% to the label and/or artist.  Could be worse (cough, PirateBay).

#5   Can’t find the music and not sure?  Contact the band on Facebook and post the question.  Most of them would love to help you find a way to buy their music.

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