Taylor Swift, her management company and label Big Machine have exploited the nature of the current music market to the maximum with the release of her new album, 1989. The album is number 1 on the Billboard chart and has earned the highest number of sales of any album since 2002. When your product is blowing up as big as that, the best business people will want to extract the greatest margin possible. In the current market that means maximising sales of downloads and physical product – at the cost of streams. This week Swift took that argument to its logical conclusion by withdrawing all her music from Spotify.
In what may be a shrewd short term move, Taylor Swift in conjunction with her label Big Machine (which is closely allied to the Universal Music Group) appear to be scapegoating Spotify for the nature of its business model and penalising those of its subscribers who are Swift fans in the process.
The fact is that the apparently simple, democratised model of a streaming service like Spotify mitigates against commercial successes like Swift. The subscription model by definition pays out a reflection of total music consumption on the service during any accounting period. The more fragmented the music market is, the more different individual artists are being played, the less each of them earns as the total pot is shared across a larger number.
This is a problem of the subscription model not a characteristic of streaming itself. In her July Op-Ed in the Wall Street Journal, Swift wrote: “Piracy, file sharing and streaming have shrunk the numbers of paid album sales drastically, and every artist has handled this blow differently.” To lump streaming with piracy and file-sharing is an interesting conflation of legitimate and illegitimate services. I’m surprised that 25 year old Ms Swift, the definition of a millennial, should make a mistake like that, but her writing was no doubt studied carefully before she submitted it, so perhaps the conflation was intended.
Clearly there is a connection between legal and illegal services. Swift already has a track-record of “windowing” and holding her albums back from Spotify. Research carried out by Spotify in Netherlands, around the release of her album Red, showed that the hold-back on the album was accompanied by increased levels of piracy and file-sharing of that album.
For this reason, in the long term, the industry must embrace the opportunities of new technologies and find better ways to take advantage of what they bring. If subscription services are scaling in the film and TV industries, it is the underlying business relationships in music’s complex eco-system that need adjusting – not the technology itself – and that would include the way artists negotiate their portion of streaming service revenue in their recording contracts. For the labels, licensing their music as widely as possible, to as many services as possible still seems like the best option for the majority of releases. A Taylor Swift album is not, however, a standard kind of release. As Billboard reported this week: “Swift is the only act to earn three million-selling weeks with an album. She also racked up million-selling weeks with the debuts of Red (1.208 million) and Speak Now (1.047 million).”
What might be the longer term implications of this short term move? In her WSJ Op-Ed Swift wrote:
“I think forming a bond with fans in the future will come in the form of constantly providing them with the element of surprise. No, I did not say “shock”; I said “surprise.” I believe couples can stay in love for decades if they just continue to surprise each other, so why can’t this love affair exist between an artist and their fans?”
Clearly, the relationship that Ms Swift nurtures with her fans is dependent on where and how those fans buy their music. It may also be true to say that as a proportion of the whole, there are fewer Swift fans among Spotify subscribers than among purchasers of CDs or of iTunes downloads. Although a single of Swift’s was, according to Musically, a music industry newsletter, the most streamed track on Spotify last week, most of those streams were outside the US. Demographically this was still a cleverly judged move. Swift’s fanbase is much bigger in the US than elsewhere and Spotify has a lower market share there than in the UK or Sweden. It highlights a key business challenge for Spotify, how to grow its subscriber base from “music aficionados” to the mainstream. The prevailing view is that we will see all of Taylor Swift’s music back on Spotify before too long, but not before the message has been delivered. Swift may want a relationship “for decades” but she is going to make very sure that it works for her, here and now, first.
If Radiohead caused a stir with their 2007, In Rainbows album by offering fans the chance to pay for the album what they wanted, Swift’s 1989 move may look like a mirror image, you pay for this only what she wanted. Neither of these atypical interventions is likely to change significantly what the rest of the industry does. But it’s great PR. Just in case the mainstream media were not talking about her enough already because of her high level of sales, this industry intervention has certainly got even more tongues wagging. Some may feel this is a “shock”, but don’t worry it was obviously only meant as a “surprise”.