Spotify has built a lovely music application that uses a peer-to-peer architecture to stream music at lightning speeds (a real improvement over the sometimes spotty service that comes with many other music streaming applications). The site is only licensed in Europe, but Ek says the site has 7 million users in 6 countries, and he’s been working hard to get it licensed in the United States. Users can listen to music for free, with ads, or can pay for a subscription that grants access to perks such as the Spotify mobile app, and song downloads.
I couldn’t help noticing, however, Ek’s artful dodge to the question of how artists are paid by his service. The subject was broached by an audience member, who identified himself as an independent musician and thanked Ek profusely for the great application. He wanted to know how much he would be paid.
“It’s complicated,” was, in essence, Ek’s reply. But he did reveal that it’s a revenue sharing model; artists get paid a proportion of whatever Spotify gets paid, presumably based on the number of plays on the site they receive.
Ek’s reply was disappointing because this is the million dollar question for many music sites. Pandora’s been on the verge of going under for years in part because they’ve paid artists even when they couldn’t afford to. It’s clever of Spotify to find a way to be cash-positive where other sites have failed, but it means the artists must wait to be paid a fair rate.
There see other problems too. For example, pop stars are likely to draw the highest proportion of plays, but how does that relate to which fans pay a subscription fee? It seems that part of what Spotify will need to figure out is what brings money to the site and how to reimburse artists fairly.