Spotify mulls a ‘paid only’ option for new music releases

9 Dec 2015 | Author: | No comments yet »

Is Spotify Backing Down From Its Hardline Stance on Free Music?.

LOS ANGELES — Music-streaming giant Spotify is toying with the idea of allowing musicians to reserve new releases for paying subscribers, although it balked at doing so for Coldplay’s latest album, according to a person familiar with the matter. Spotify told music executives it was planning to allow some artistes to start releasing albums only to its paid subscribers, while withholding the music temporarily from Spotify’s 80 million free users, the Wall Street Journal reported.A source tells Billboard that a premium-only window of availability was considered for Coldplay’s A Head Full of Dreams, released this past Friday, though Jonathan Prince, Spotify’s global head of communications & public policy, says it was “ultimately decided, together with management, that Coldplay and its fans would best be served with the full album on both free and premium this Friday.” Prince says the company stands behind its current model “100 percent.” As of March this year, premium subscribers accounted for 91 percent of the company’s revenue.Since it started in 2008, the streaming service Spotify has clung fiercely to its so-called freemium model, arguing that the best way to get people to buy a subscription for unlimited music online is to make the same catalog of songs also available free to listeners, but with ads.Spotify Ltd. will let some artists offer their new releases only on its paid service for a period of time, according to people with knowledge of the matter, in a major concession to music labels.

Spotify might let artists release new music only through the service’s paid tier, bypassing the free tier that has inspired criticism from artists including Taylor Swift. That strategy has helped Spotify grow into the biggest service of its kind, with what the company says is more than 20 million paying users and another 55 million who use its free version. The move, described as a test by the people, is a departure from the company’s current practice of requiring all music to be available on both its free streaming service and the monthly paid version. Last year, Taylor Swift pulled her entire catalogue of music from Spotify and refused to offer 1989 on streaming services, saying the streaming business had shrunk the number of paid album sales drastically. A “paid-only” window might also increase album sales if it led more music fans to purchase music rather than wait months or years for it to become available via cumbersome free options involving ads or the use of computers instead of phones or tablets.

The premium window would seem to make most sense for the transition to streaming of Adele’s 25, which has been kept off all on-demand services since it was released on Nov. 20. Spotify is backing down after pressure from record companies and artists such as Taylor Swift and Coldplay, who have withheld records from free services in a push to generate more revenue from music streaming.

That strategy, sometimes called windowing, is something that record labels have long been lobbying for, but Spotify has resisted, said the people, who spoke on condition of anonymity because they were not authorized to discuss the talks publicly. The industry has withered over the past decade because of piracy and the shift to online listening — most recently with free streaming, which cut into download sales from Apple Inc.’s iTunes store. Music: “All I can say is that music is changing so quickly, and the landscape of the music industry itself is changing so quickly, that everything new, like Spotify, all feels to me a bit like a grand experiment. If it’s true that Spotify is considering giving some artists “special treatment” as described by the Journal, the two-class system could present problems for both labels and Spotify.

And I’m not willing to contribute my life’s work to an experiment that I don’t feel fairly compensates the writers, producers, artists, and creators of this music.” It wants to investigate how such a “windowed” approach might affect usage and subscription sign-ups but hasn’t decided which artist will first get to withhold music from the free service, this person added, and the company isn’t ready to announce a permanent policy change. Conversely, if the windowing strategy were made available to all, Spotify would have given up a key aspect of its business model and lost what it considers to be a productive customer acquisition tool. There had been talk earlier this year of Spotify adopting a similar approach to Apple Music — three months of free listening, after which fans can pay, or not play — though those talks never materialized in a change to company policy. Lucian Grainge, chairman and CEO of Universal Music Group, began rattling his saber against freemium about a year ago, culminating in the exit of two senior digital executives at the company, reportedly over their dissent on this issue.

As Billboard wrote in March: … others insist the directive comes from chairman/CEO Grainge, who wants individual labels to “have skin in the game in terms of the digital strategy,” according to one source, and be involved in cutting deals with digital music services. Similarly, Adele withheld her latest album “25” from all streaming services, which may have helped it achieve 4.5 million album sales in its first two weeks in release. While it publicly has taken the line that its free and paid services must have the same music to attract new users, in negotiations, Spotify has expressed a willingness to test out different ways of releasing music, according to two people familiar with such talks. Jonathan Prince has repeatedly reiterated the company’s position: “If you want subscriptions, why on earth would you cut off the pool that you’re getting subscriptions from?

Spotify’s free service is unusually generous, allowing users who are willing to tolerate a few ads to select an entire album for free playback on computers, or on mobile devices so long as the tracks are shuffled out of order. YouTube remains the only wholly free service — and a large one at that — outside of Pandora (which doesn’t allow listeners to choose the music they’re hearing beyond a “seed” pick, after which the company’s algorithm takes the steering wheel). Swift, who have defied industry trends by selling huge numbers of CDs and downloads, it is also unclear how many artists would want to remove themselves from Spotify’s free version, which for many acts has become an immensely valuable form of promotion. Deezer outside of the U.S. “The problem is, Daniel is so evangelical about the process, you can’t change his mind,” one high-level label executive told Billboard in a June cover story on Spotify CEO and co-founder Daniel Ek.

Only about a third of survey respondents in more than a dozen countries had listened to a free music streaming service in the last six months, according to the 2015 Digital Music Report by the International Federation of the Phonographic Industry.

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