BEN SISARIO NY Times 7/26/12
Spotify arrived in the United States a year ago this month, and to note the occasion it sent subscribers an infographic with some intriguing numbers. But the most important figures are the ones it doesn’t release.
In the mailing, sent late last week, the company said its American users listened to “over 13 billion songs” in the year. They also shared 27.8 million tracks through social media – 55.3 percent of them through Facebook, 41.5 percent on Spotify’s own system, and 2.7 percent via Twitter.
It has been a big year for Spotify, which lets people stream millions of songs free, with ads, or pay $5 to $10 a month to listen without ads. The company struck partnerships with Facebook and Coca-Cola, spiced up its once-plain home page with dozens of third-party apps, and is reportedly in the process of raising $220 million in investment at a whopping $4 billion valuation.
But for people in the music business, Spotify has been frustratingly slow to release data on its users and its complex royalty system, and the opacity of the system has raised perennial worries among artists that they are not getting their share.
Spotify has not updated its number of total users (10 million) in over a year, nor its number of paying subscribers (three million) since January. It has also never said how many of those users, paying or not, are in the United States.
For record companies, artists and advertisers, these numbers matter, particularly in comparison with other services. Each month, Pandora, for example, draws 54 million people who listen to more than a billion hours of commercial-dotted music. Rhapsody, another streaming service, is believed to have more subscribers in the United States than Spotify, at somewhat more than one million.
Spotify came to the United States on a wave of hype, much of it of the company’s own making. In an advertising pitch sheet uncovered by the technology news site AllThingsD shortly ahead of Spotify’s arrival here, the company said it would draw 50 million users within a year. Predictions like that can only result in letdowns.
For artists, the most imperative, and contested, numbers are Spotify’s royalty rates. Like Pandora, it pays fractions of a cent each time a song is streamed. But while Pandora’s rates are set by federal statute, Spotify – along with Rhapsody and most other “on-demand” services — makes private agreements with labels, and the company has been opaque about how much it pays.
That has not stopped artists and others from cobbling together data and comparing it online. In the most recent example, Ditto Music, a British digital music distributor, noted that streams to paying subscribers pay three times as much as those to nonpaying users (1.53 cents versus 0.51 cents). But that number most likely represents only what Spotify pays record labels, which then pay another fraction to artists under the terms of their contracts. (The major labels, along with Merlin, a group that negotiates on behalf of idie labels, own a minority stake in Spotify.)
Those low payouts have led some acts to withhold their music from Spotify, under the theory that keeping their songs off Spotify will increase sales on more remunerative services like iTunes. In the case of Adele’s “21,” the biggest hit of the last two years, the full album was kept off Spotify until last month. During that time it sold more than nine million copies in the United States.