Indie labels quitting Spotify. Trouble in paradise?

“There [does] not appear to be an upside,” says Prosthetic co-owner E.J. Johantgen. The only income from the service comes in “fractions of pennies,” even on their biggest titles, he goes on. What’s craziest is that Prosthetic is now the third Los Angeles-area metal label to remove its titles, joining Century Media and Metal Blade. [LA Weekly]

Century Media press release:

While everyone at the label group believes in the ever changing possibilities of new technology and new ways of bringing music to the fans, Century Media is also of the opinion that Spotify in its present shape and form isn’t the way forward. The income streams to the artists are affected massively and therefore that accelerates the downward spiral, which eventually will lead to artists not being able to record music the way it should be recorded. Ultimately, in some cases, it will completely kill a lot of smaller bands that are already struggling to make ends meet.

Bruce Houghton of Hypebot puts it well when he writes:

A few small labels pulling material off Spotify, does not leave significant holes in the music streamers catalog — unless perhaps if you’re a fan of indie LA metal. But it is symptomatic of what appears to be a bigger problem brewing for Spotify within the independent and d.i.y. music community.

This is not hyperbole. A U.K.-based indie band, Uniform Motion, told Gizmodo that they make $0.0041 per song play and 4 cents per album play. This isn’t much, and unfortunately, the situation isn’t all that different on other services too. The reality is we’re living in a whole new world. Spotify is just an embodiment of the big change in our world.

There is no app/service I use more often than Spotify. It has completely revolutionized the way I consume and buy music. I haven’t touched my iTunes (s aapl) account in weeks. I would try to buy about 20 to 25 tracks every month. I am now down to five songs at best. With Spotify enabled on every single device in my apartment — Sonos, iPad and my MacBook Air (s aapl) — I have less of a reason to go elsewhere.

As we start to be connected more often in more places, our expectations of what is media, how we consume it and how we pay for it are changing. (We are going to be talking a lot more about connectivity-driven change at the GigaOM RoadMap Conference on Nov. 10 in San Francisco.)

It is an unfortunate change, and it’s hard to see artists/creators getting squeezed by the change. You can see the strains of this change in this thread on Hypebot. I don’t really have any answers, except I am happy to pay for whatever content I want. I used to buy CDs, then singles and now Spotify. My usage has just adapted to my connectivity. I have 100 Mbps at home. I don’t see any need to own any physical media. And when I buy something, it’s mostly for loading on the iPhone/iPad for my travels or because I absolutely love it.

I am waiting to hear back from Spotify and will update the post accordingly.

Updated: Here is Spotify’s (via email) statement:

“Spotify does not sell streams, but access to music. Users pay for this access either via a subscription fee or with their ear time via the ad-supported service [just like commercial radio] – they do not pay per stream. In other words, Spotify is not a unit based business and it does not make sense to look at revenues from Spotify from a per stream or other music unit-based point of view. Instead, one must look at the overall revenues that Spotify is generating, and how these revenues grow over time.

Spotify is generating serious revenues for rights holders, labels, publishers and the artists that they represent.  We have paid over $100m to rights holders since our launch, and the overwhelming majority of our label partners are thrilled with the revenues we’re returning to them. Spotify is now the second single largest source of digital music revenue for labels in Europe, according to  IFPI.

It is also important to note that Spotify was created as a better, more convenient alternative to piracy. Estimates suggest that around 95% of all music downloads are illegal. Spotify is now monetising an audience the large majority of whom were downloading illegally (and therefore not making a penny for the industry) before Spotify was available.”

Earache Records’ Al Dawson also weighs in on Spotify.

I think it is no coincidence that when Spotify launched here in the USA, we also had our best ever month of sales on iTunes. Spotify is just one of the many new ways that fans can find and listen to new music by our recording artists and should be seen as that and nothing more.” [Metal Insider]