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Tuesday
Feb072012

Hear-Like-Buy: Why Spotify Is Marketing, Not Commerce

You can’t read an article in the music press without tripping over somebody complaining about Spotify royalties. You’ve heard the chorus: Spotify is destroying what’s left of the CD market. It is cannibalizing iTunes. It is ripping off indie artists. And so on.

So, you think. Spotify must be pretty bad.

But is it?

Do you think of your music as a product or as a service? Examples of a product would be a CD or a download, or any physical package that contains your music. Examples of a service would be a radio play or a performance, or any act that conveys your music. Which matters more to you — the package your music comes in or the performance of it? Are you delivering your actual music to the world — the essence of who you are as an artist — or just knock-offs of it?

Unlike Amazon and iTunes, Spotify is not selling a product. It is selling a service — i.e., elegantly designed access to a massive and diverse library of music.  It is not a retailer selling “units,” but a facilitator of the spread of creative works. It more closely resembles the original Napster than it does Amazon or iTunes. But unlike Napster, it recognizes the validity of copyright and conducts its business accordingly. It tracks and pays artists for every exposure of their work, no matter how small.

Spotify is providing access to this platform not just to the major labels (who used to control the distribution of music to Tower Records and every other retail chain), but to legions of aspiring, unknown songwriters tracking demos in their garages and bedrooms. More importantly, it is allowing those unknowns — most of whom are not yet commercially viable — to maintain a searchable presence on its garishly financed, cutting-edge platform, and to benefit from that presence.

Spotify doesn’t charge artists for that exposure. No, it pays a modest royalty, which is more than Megaupload or Napster or mixtape makers ever did.

The Power of “Hear-Like-Buy”

Make no mistake: You can stock the shelves of Best Buy or Walmart to the ceilings with your music, but if people can’t listen to it, they will not buy it. They won’t know it from a gaping hole in the ground. If they can actually hear it, though, it’s a quick hop to liking it. And if they like it enough, they can — and will — buy it.

Just like they’ll buy anything they value.

All you need to do is make your music readily available — through social-media marketing, through live performances, through music-sharing sites like Spotify, and via whatever recorded-media retail you choose.  You are not selling widgets, you are not “moving product.” You are providing a service. You are conveying your brand, your identity as an artist, to an audience.

If people like what you’re offering, the rest will take care of itself.

This thinking goes back a long way (to at least the Sermon on the Mount): Don’t hide your light under a bushel. Shine it so everyone can see.

Mark Doyon is founder and creative director of Wampus Multimedia, a music label, ebook publisher, and an identity & branding group in the Washington, D.C. area.

Reader Comments (14)

Are you referring to the free (limited) Spotify or the premium service? The premium service is absolutely not about try and buy. You can offline the music across multiple devices and so long as you keep paying your subscription you have no incentive to purchase music digitally.

February 7 | Unregistered CommenterPhil C

In a word: balls.

Spotify already allows you to substitute access for ownership to some extent and it's only going to get better at it. Once you can listen to anything you want, whenever you want, through the magic of your Spotify subscription, why would you ever want to buy anything?

Hear-Like-Buy is a lovely concept, except it is inexplicably always used to justify business propositions where the "Hear" takes the "Buy" out of the equation.

February 7 | Unregistered CommenterFaza (TCM)

Spotify Premium users have very little (if any) encouragement to buy an album.

In fact, the hassle of going to a shop, purchasing an album, uploading it to my computer and syncing it to a phone has been removed by Spotify's offline features and their unlimited plays.

Regular Spotify users might be moved to a purchase decision through advert frustration but premium users have no motivation to buy after they've tried.

Traffic is driven to Spotify through marketing. It is not marketing the bands. Front page advertising and banner ads from major label marketing departments might be creating the initial interest, but fans are driven TO Spotify from blogs, social networks, traditional advertising, friend recommendation - the marketing already exists.

That said, you're right in the sense that it is more beneficial to an artist than Napster... but just because they're not stealing the music, it doesn't mean that they're doing the artist a favor.

February 7 | Unregistered CommenterChristopher

Spotify doesn’t charge artists for that exposure. No, it pays a modest royalty, which is more than Megaupload or Napster or mixtape makers ever did.

Less than a penny per stream is NOT a modest royalty. We get maybe $0.0043 per play after Spotify and distro takes their cut and then we still have to pay the artist. That's NOT a modest royalty, that is making theft look pretty.

February 7 | Unregistered CommenterDave Richards

Spotify is marketing - but only for the four or five major labels who happen to now own an equity share. For those of us with idependent labels, it is a thorough rip-off that has been found out and, rightly, well publicised. Hundreds of labels have pulled their releases from Spotify and rightly so. From its first inception, it was clearly the old, dying, dinosaur industry masquerading as part of the new digital economy. It isn't. As long as it rips off artists while making money from their work, it is part of the old world and every criticism Spotify gets, it deserves. No amount of 'rebranding' aimed at perception changing, like this article, will change that.

February 7 | Unregistered CommenterVince Millett

I believe there is a ridiculous notion out there that this is ever going to stop. Artists need to move on from a belief that they are going to be paid every single time their song is streamed or played online. It IS a service, you need to be able to get your music out there in any way you can. Along with the fact the an artists main revenue is going to be performing and selling merch and music at your concert (better than your itunes check). Instead of trying to stop something that shows no signs of slowing down, use it to your advantage. Its a new music industry now and us the artists need to change, not the audience.

February 7 | Unregistered CommenterJonny

Along with the fact the an artists main revenue is going to be performing and selling merch and music at your concert (better than your itunes check).

If you're already paying for a streaming service, there is no need to purchase music at a concert.

It also depends on who your market really is. If you're an EDM artist like myself, then the only people who will really buy your music in numbers are DJs. In a way then, streaming doesn't matter.

But, beyond that, streaming has the same issue, if not more so than iTunes or even Beatport. There's so much easy access to the big names that the little get lost in a sea of little names. Yes, that's an age old issue, but at the same time it's compounded by an exponential number of little names. At least in a local market, the little names seem to be more consolidated.

And yes... it does come back to live performance revenues.

Its a new music industry now and us the artists need to change, not the audience.

But, the audience has changed. It's more like the industry has to match the audience now.

Regardless, I have to keep coming back to a simple principle. You should pay a man what his work is worth. $0.0034 per song streamed isn't meeting that standard. The artists on my label are "lucky" that we put their needs first and they keep more than 50% of that.

February 7 | Unregistered CommenterDave Richards

Spotify is available in several countries with a total of 556.000.00 million inhabitants.
Assume 40% of them are potential music buyers. Spotify has 15 million users.
That's 7% of the potential buyers. What possible effect can they have on your income?

How many radiostations are there in these countries and how do they affect your income?
How many listeners of how many radiostations have to listen to one broadcast of Yesterday of the Beatles to grant an income of $ 1161.- to the heirs of Michael Jackson?

So don't kid yourself that a million streams on Sporify or one broadcast of a radiostion (with one million listeners) of one of your songs grants you a reasonable income.

If anyone can give me figures of how much radiostations pay per play please do.

February 7 | Registered CommenterHarry D

If you're already paying for a streaming service, there is no need to purchase music at a concert.

Oh yes there is! Autographes. At a concert I allways connect with the musicians (if I like their music) and I never buy a CD without an autograph of all the bandmembers.

February 7 | Registered CommenterHarry D

Everyone that I know who has a premium Spotify account, they have stopped buying albums, even after discovering new bands that they really enjoyed. Why buy, when you can stream it whenever you want? Spotify will need to put into place play limitations, in which you can only play a song 10 times, etc, in a month. This will encourage sales to still occur, and not be as badly cannibalized. Royalty rates should not be "streaming" royalty rates if the fan is able to actively choose and listen to whatever they want, as many times as they want. At that point, it should be a mechanical royalty. Even $0.01/play is a pittance.

February 8 | Unregistered CommenterDurandal

Okay, here's my personal experience. Since Spotify launched in the USA my digital earnings are down about 50%. I am not willing to say that it is all Spotify's fault, I think there's plenty of blame to go around.

@Harry - There are a lot of variables to cause how much you get from a radio station play, but I think with the college stations that play my music it's probably close to a nickel per spin.

If you want to sample music you can do it all day long at iTunes via their 1.30 snippets. I don't agree that a significant amount of people hearing music on Spotify then go over to iTunes to buy. Sure it happens but does it happen enough to devalue the entire catalog of popular music? I look forward to when the funding goes away, when the advertising dries up, and lemming look for warmer climate.

February 9 | Unregistered CommenterWeird Gilly

"...but if people can’t listen to it, they will not buy it..."

I absolutely agree. But I have the impression that this was - by far - the smallest problem in the last 10 years. In fact, this problem was solved by an enormous network years ago. It wasn't a problem for most to access music 10 years ago, not to mention the appearance of services like youtube, last.fm, deezer, soundcloud, mixcloud and many others. Spotify is not the world and it didn't revolutionize anything, at least from my observations. Free and legal streaming access is a fact since more than 5 years.

My whole objection against Spotify is simple: They must offer a proper deal or stay out. There is absolutely nothing to lose from a late check it, there's no hurry. Many Streaming services offer better rates and most of all much more effective promotional side-effects.

Spotify cleverly manages to promote its own world instead of the artists. The promotional effect everybody talks about is totally overrated IMHO.

The simple fact the Spotify doesn't have "everything" will cool down the hype sooner or later. Today's music fans are much more mature and better informed then they were a few years ago. The "If you're not on XY your music doesn't exist" argument is just plain wrong nowadays, it's the opposite: "If your service doesn't satisfy everyone, your service doesn't exist".

I think that artist must wake up and realize how much original content is really worth in today's jungle of content aggregators. It gold! Germany's "GEMA" for example managed to keep youtube and spotify out of the business: Simply because their shares are way too low (many casual listeners actually don't like blocked websites, but it shows how much power artists can have).

February 11 | Unregistered CommenterFabien

Music artists welcome to the club, as a contractor I lost %50 percent of my bussiness too. Blame who ever you want, but I suggest finding a computer wiz to build you guys a bot and play your music 24/7 on spotify and generate your own income.

September 11 | Unregistered CommenterShawn

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