Free unlimited music streaming comes to an end on Spotify

After reading about it in the news a couple of weeks ago, sure enough when I started up Spotify yesterday, I was greeted by a message stating I could now only listen to each track a maximum of 5 times... Ever! Additionally, I am now limited to 10 hours of streaming per month, although both of these restrictions can be removed if I choose to upgrade to a paid subscription account (either £4.99pm or £9.99pm for offline and mobile access). I have reservations about this however – I was attracted to Spotify on the promise of unlimited, free streaming of music, with the odd advert thrown in - which was never much of a problem for me. That promise is now gone. Perhaps buried in the terms and conditions it stated that this wouldn’t last, and as I was never paying for anything I suppose they have no obligations to continue what they were offering me. I’m not saying what they’ve done is in anyway devious, it’s just frustrating to see such a good service pretty much give up on its free offering.

A lot of what I chose to listen to on Spotify is music that is being played a lot at the time – whether on radio, TV, as a song on a TV advert or whatever – it gets into my head and so I would decide to listen to it on Spotify. During that time, I would probably listen to it quite a few times and investigate other music by the artist, and similar, related artists. However, after a few weeks - once there were no other sources for that song to make its way into my head - I would rarely return to it out of choice. Buying this track or album would therefore have been a waste; it would probably lie dormant on my computer and barely ever get played again. Maybe I am an unusual case and nobody else treats music like this, but having a service as simple as Spotify, and supported by ads was the perfect solution for how I view the majority of music.

I guess perhaps that I fall into the group of users who by using Spotify for mainly finding new tracks, shouldn’t be greatly affected by the changes. Maybe this is applicable for the 5 plays per track limit (although if something really gets into my head, that could be used up in a couple of days), but 10 hours a month is barely anything. And for those tracks which I do want to return to over and over again... well now I’ll be needing a new source – I would rather make small one-off purchases for these than pay a monthly subscription to stream them.

Of course the big issue is that the royalties generated by each play of a track through services such as this are incredibly low compared to the purchase of a track or album. This visualisation provides a rather striking view of how many track plays an artist must receive to make the minimum wage in America – if Spotify were the only music source then they would need 4,053,110 plays per month. This implies that it just isn’t possible to support free music streaming with adverts, as it will never pay enough royalties to make it worthwhile for the artist. But what this chart also shows is that for each ‘play’ of a track, the record label receives $0.0016, compared to the artist’s $0.00029 – around 5 times as much. Going by Wikipedia’s entry on what a record label’s job actually is, and slightly generalising things, this revenue is going to the production, manufacture, distribution and marketing costs. To me, this is crazy. The Web, and services such as Spotify, Last.fm and iTunes should mean that manufacture and distribution costs should effectively be removed (it costs nothing to replicate an MP3 track and send it over the Web).  These services all include recommendation features for suggesting similar music, and musical social networks let friends see what each other are listening to. Therefore, is marketing music in the Web era necessary to the same extent as before?

What I’m trying to say here is that the Web has changed the music industry a lot. Record labels originate from a time before the Web, and continue to try and impose themselves on an industry fast becoming dominated by Web companies. To me, it seems that their role is quickly becoming redundant, yet as they continue to attempt to stamp their authority and grasp on to their tried and trusted revenue sources, they are preventing companies such as Spotify from offering something truly different – free, on-demand music streaming. I think the idea of Spotify was great, and I really do believe it could have worked had the artists received a higher share compared to the record labels.

Here’s some quick maths to see how things could change.

• Currently if the artist receives the required 4,053,110 plays per month with each play earning them $0.00029, they would earn $1175.4.
• If they were also to receive all the revenue currently taken by the record label, they would earn $0.00189 per play. To make the same $1175.4 they would now need 621,904 plays per month. (This is still a huge amount, but is an 85% decrease in the number of plays previously required).
• Using the same visualisation of numbers, it can be seen that for MP3 downloads from Amazon or iTunes, 12,399 downloads per month are required to earn the same amount. Assuming that instead of purchasing a song, these 12,399 people all decided to stream it, then using 621,904 as the total number of streams, each of these people would need to stream the track 50 times per month. (Still quite high, although down to less than 2 plays per day per person)
• Now the following is all my own estimations and guesses. Because a streaming a song for free costs nothing, and an MP3 download does, it doesn’t seem outrageous to suggest that more people would stream the track than buy it. If we roughly estimate that 1 out of every 2 people who hear a song go on to purchase it, then it could be said that instead of 12,399 people streaming the song, 25,000 would do so. This would require each of these 25,000 people to stream the track about 25 times per month, or less than once a day.
• In reality, I think even more than twice the amount of people would stream a track rather than buying it, so this would again be lower, and reaches the point where it’s not unreasonable to think that this could work.   
• Furthermore, it must be remembered that while these figures are calculating the requirements for an artist to make the minimum wage, there will always be other revenue sources for successful artists such as concert and performance tickets, merchandising, and CD sales for those people who will always want a physical product.

 I don’t know whether this is possible, or even a reasonable thing to suggest. I don’t know enough about the music industry to know whether an artist would receive all of the revenue currently going to the record label if they were to be removed – I’m sure somewhere along the line there is probably something they would have to pay for. These numbers are just a brief look at what is currently going on in the industry, and how I think the Web could change it even more. I would love to hear other people’s opinions on this, as there are probably many people out there who know a lot more about this area than I do.