Dollars And No Sense: Is the digital revolution leaving artists and consumers behind?

The Birth Of A Giant

“Daniel just saw the opportunities of streaming music before anyone else.” – Mark Zuckerberg on Spotify’s Daniel Ek, The New Yorker.

You wouldn’t think much of Daniel Ek if you met him in the flesh. He is not one of those people who immediately impresses upon you, and he has little of the charisma and panache we usually associate with the very wealthy. Sure, he is a tech giant, and it’s true very few tech giants have anything resembling a rock star personality, but even when placed beside fellow silicon valley billionaires like Peter Thiel and Bill Gates, Ek comes across as a little cloying.

Part of that, surely, is thanks to his outfits, which are habitually adolescent. He wears hooded jumpers; dark, scuffed trousers; t-shirts and polo shirts. And part of that too is thanks to his manner, which is so relaxed and unassuming as to be almost a little rude. “[Ek] doesn’t greet you with a firm handshake from behind an imposing desk,” reads a line in a 2008 New Yorker story about Ek. “He doesn’t have a desk. He sprawls on a couch with his laptop, like a teen-ager doing homework.”

Ek was born in 1983, in Sweden. He was, like so many other tech-head ultra-achievers, relentlessly hands on as a child, not to mention smart as a whip. By the age of 14, he had already founded his very first company, and before long he was in the business of building up fast-growing, agile little brands only to sell them off to the bigger fish, accumulating both a considerable amount of equity and experience along the way.

Perhaps unsurprisingly as a result of this omnivorous attitude to business, Ek’s resume is astonishingly varied. He worked with the Nordic auction company Tradera, a kind of online marketplace that was eventually sold to the world’s most famous online marketplace, Ebay. He briefly served as the CEO of uTorrent. And he founded Advertigo, a company so profitable that he almost considered retiring at the ripe old age of 23 after selling it off to TradeDoubler for a multi-million dollar sum.

Ek even, strangely enough, served as the CTO of Stardoll, an online game designed for pre-teens, in which users can dress up a variety of grinning, eerie digital avatars in whatever clothes they desire. By March 2014, the site, which Ek has now sold, was attracting 300 million users from across the globe.

But despite such success, up till 2006 Ek was rather a non-entity as far as the broader public was concerned. He was a faceless silicon valley nerd; a multimillionaire who appeared in no gossip columns, bought no outrageously expensive properties and dated no supermodels. Indeed, despite his vast wealth, he has always lived relatively humbly, settling down with his longterm partner Sofia Levander to live a life of subtle wealth; of unlimited opportunities, rather than the unlimited gilt-coated detritus we usually associate with people who have more money than they could ever use up in their lives.

And then, in 2006, everything changed for Ek. Partnering with Martin Lorentzon, one of the founders of TradeDoubler, Ek began working on a vision for a new music streaming service; one that would work on the basis of a “freemium” model. Customers would pay a monthly subscription, rather than an individual download fee – and, for those not ready to put down a payment up front, it was always possible to access music without spending a dime.

As a result of such a model, diehard digital music lovers could get as much content as they possibly wanted, but even casual, less committed customers could check the service out for themselves. The broadest possible spectrum of music listeners could thus be covered – and, as a result, the broadest possible spectrum of consumers could be encouraged to fork out their hard-earned cash.

Within a few months, and based on that singular model, Spotify was born. Though Ek later argued that the name was a portmanteau of “spot” and “identify”, it was nothing quite so planned – the title was a misheard bastardisation of another name bellowed across a crowded office by the eager Lorentzon.

For two years, Lorentzon and Ek worked away on perfecting Spotify, and although for some it might feel like it was only a matter of a year or so before the service became a household name, the rollout was considerably slower than some might remember. Spotify launched in 2008, on October 7, and at first, it made only the tiniest of splashes. After all, the digital music world was a kind of wild west back then; the door had been blown open, and every entrepreneur and their dog were struggling to get their share of the revenue.

And that’s not to mention the fact that, at the heart of it, Ek and Lorentzon didn’t have a particularly unique product. No users were going to be drawn to Spotify because of the shining new possibilities of downloading music from the web, and the genuinely revolutionary thrill of accessing content via the internet had lost some of its once striking gleam. After all, Napster, the peer-to-peer music sharing brainchild of Sean Parker, had been out since 1998; it was already ten years old by the time Lorentzon and Ek unleashed their own streaming baby onto the world. The digital usurpation of the music industry was not new. Lorentzon and Ek were not changing the game; they were playing it, just like everyone else.

But what Ek and Lorentzon did have was ease of access. Their product essentially sold itself. There was no need for customers to sign up for irritating free trials; no need for the pair to launch over the top, extravagant ad campaigns. Like few other apps available, Spotify utilised the power of word of mouth. Someone could tell you about this cool new thing called Spotify they had heard about, and two minutes later you could be downloading it yourself, listening to the wide range of bands and songs the service had to offer.

It was different, in that way, to a service like Pandora. Although Pandora had been around a lot longer than Spotify – it was founded by Will Glaser, Jon Kraft and Tim Westergren back in 2000 – it had none of the sleek, streamlined interface of Ek and Lorentzon’s brand. Pandora was about recommending music, and the balance of power was thus always in the service’s favour. You didn’t have free rein as you did with Spotify – Pandora made the decisions for you, recommending music based on your pre-existing, pre-programmed likes and dislikes.

Pandora was more complicated, too. Spotify was only ever as difficult to use as listeners wanted it to be. You could – and still can – listen to Spotify with only the barest of technical knowhow. All you have to do is open the service up, type in the name of a band or a song, and the app does the rest for you. You can, of course, if you want, dip your toes into Spotify’s world of recommendations, and artist radios, and playlists – but you don’t have to. Spotify can be used by everyone, from your 90-something-year-old grandma to that hip young mate of yours who has the world’s most omnivorous music tastes.

So perhaps it was unsurprising that before long Spotify was rolling out across the world, picking up millions of users internationally. By February 2009, Spotify had opened up headquarters in the UK, and in the same month, users from that country were given the opportunity to sign up for the free version of the service. But Spotify had gathered so much steam by this point – was generating so much interest – that the company had to rapidly swap over to an invite only policy when the free registrations spiked to unmanageable levels.

Within two years, Spotify rolled across America. Realising the country was the most important market to crack for the future of the service, Ek and Lorentzon made sure not to mess around: when Spotify launched in the States in July 2011, new users could enjoy six whole months of unfettered, free listening. Which they did. In droves.

And within but a single year, Spotify was a major player not only in America, but internationally. It had gone from being one more service in an overcrowded market, to the service in a rapidly shrinking market – from a scrappy little underdog to an unquestionable, unstoppable music streaming giant.

Worldwide Reach

“Spotify is now in fifty-eight countries. It has raised more than half a billion dollars from investors, including Goldman Sachs, to fund its expansion, and there are rumors of an I.P.O. in its future, to raise more.” – John Seabrook, The New Yorker.

Of course, since then, Spotify has only grown in stature. With a massive listener base behind it, the service has been able to adapt and alter itself to its audience’s tastes. New innovations like a “Spotify Play Button” that allow albums to be embedded onto sites and a fresh, easy-to-use web player have kept people signing up – and have kept the site expanding and growing. Ek and Lorentzon, smart innovators who long ago learnt that the key to a company’s future is movement, have never rested on their laurels, and have spent the last few years magpie-ing together a range of fresh new elements.

These days, Spotify boasts fully integrated musical recommendations; an automatic play feature that starts up new albums as soon as you’ve finished listening to one; and the prestige and exclusivity of the “Spotify Sessions”, Spotify-only performances from well-established international artists. And in accumulating these new bougie attention grabbers, the service now has very few direct competitors.

That’s not to say Spotify has had an entirely easy ride – there have been bumps along the way, of course, and new obstacles emerged that the company was forced to nimbly skip between. It may seem laughable to imagine now, but Tidal, the brainchild of rapper and entrepreneur Shawn Carter, AKA Jay Z, once appeared to be the service that might stop Spotify’s seemingly irresistible rise.

After all, Tidal had that thing that Spotify had long ago been forced to sacrifice: personality. Spotify was a faceless company presided over by a boyish looking, singularly uncharismatic Swedish man, while Tidal, by contrast, was run by a collective of instantly recognisable faces. While Ek had his ad men and his board rooms of executives, all scurrying away behind the scenes to make a depersonalised company feel like the listeners’ best mate, Carter had his wife, Beyonce, not to mention Will Butler of Arcade Fire and a host of musical gamechangers described by the site Noisey as a “pantheon of pop music Avengers”.

And, perhaps more worryingly for Spotify than that, Tidal had the cool factor. They were the underdogs – something Spotify had not been for a long time and could maybe never be again. There is, after all, considerable danger to commercial success. It’s what Mark Zuckerburg of Facebook has had to face, and it is what all like him will eventually have to come up against too: make too much money and before long you will always be the bad guy.

But despite all that was on the streaming service’s side, Tidal opened with a commercial impact more akin to a drop in an ocean than a wave, tidal or otherwise. Before long, the service was a laughing stock: living proof that no matter how rich and successful you are, you can’t just buy your way into a world that you don’t fully understand; that you can’t haul a bunch of famous people in front of a camera and hope that paves your way to international domination.

And, in that way, the slow, still unfurling failure of Tidal turned out to be nothing more than a notch to be carved into Spotify’s bedpost. The company had weathered threats of all sorts, but most impressively of all, they had weathered one from a brand that had everything that they didn’t – a brand that had star power, and panache, and prestige. So perhaps it is unsurprising that we are gearing up to a world of music streaming sites in which Spotify is unparalleled; a world in which we might have only one viable option for our music listening. A world where only one service is left.

Now The Others Have Gone

“Since we opened the doors [of Pandora] in 2012, the team grew our user base to over one million monthly listeners, delivered market-shaping advertising … and executed highly successful music events and sponsorships. To that end … I’d like to thank our listeners for giving us the opportunity to connect them with the music they love.” – Rick Gleave, Pandora’s director of business development and partnerships.

A few months ago, an industry insider found themselves at an event hosted by the streaming service Pandora. It was, they say in no uncertain terms, an absolute shambles. “There were expensive drinks, and high profile acts, and it was all taking place in an incredible, massive venue,” the anonymous insider told The BRAG. “It was the kind of event that execs hope will make their company seem big, and powerful, and hip and exciting, and all that fucking stuff. But it was an absolute disaster.”

The problem, the insider explains, was mostly one of vibe. Massive signs that hung around the venue encouraged punters – some of whom were industry players, some of whom were members of the public who had won a competition – to take photos of themselves that could then be sent out on Instagram with an accompanying, prescribed, tongue-in-cheek hashtag. But nobody was taking pictures. The crowd were hanging around awkwardly in corners, sipping on insanely overpriced drinks and quite obviously wishing they were somewhere else.

Bands played, but none of them played well, and before long the bored audience started pegging the large inflatable balls that had been dropped down onto them at the shellshocked artists. One of them, a fairly uninteresting Australian pop star who had her heyday in the early two thousands, started getting narky. “Are we going to watch where those balls are going?” she said, her stunningly artificial laughter barely covering the grating edge to her voice. Before long, even more balls were being hurled her way, and those who weren’t trying to bang the artist’s microphone away from her mouth were shuffling out of the venue, shaking their heads in quite genuine disappointment.

It was a nightmare that only got worse as the evening wore on. Before too long, the massive, industrial looking venue was almost completely deserted. Punters milled around the back, eager to get away from the blaring noise of a nobody rapper trotting out the world’s most uninspired set to an audience who wished he’d just shut up. When the event finally did wrap up, it did with all the tragic, lingering inevitability that defines the end of a wake.

Which is all to say, it is not surprising that Pandora recently announced that they were shutting up shop here in Australia and New Zealand. They have been on the back foot for long enough now, and their extravagantly organised events have spoken only to their great desperation. A successful company doesn’t need to organise cloying, desperate, attention grabbing events – doesn’t need to artificially inject themselves with a shot of prestige, and with power.

Indeed, the desperation exhibited by Pandora over the last few months makes it hard to feel entirely sorry for the company. In the late capitalistic age in which we live, the once wild entrepreneurial free-for-all has settled down, and the deaths of once promising companies doesn’t feel like anything worth mourning. Pandora flew too close to the sun – overcomplicated what should be a very uncomplicated way of accessing digital music – and then they fell apart. Fuck ‘em. Who cares? The world is full of such companies and such commercial disasters, and who is going to shed any tears over the end of a gaggle of overpaid businessmen who only ever wanted our money anyway?

But the aftermath of the digital revolution – the destruction and the economic collapse happening all around us – should give us cause for concern. Not, mind you, because we should give a damn about the suits behind these failed companies, but because we should fear what might happen if we are left without competition; if our life becomes bound to a series of unrivalled, all powerful technological companies.

You can see it already begin to happen now in other areas of the digital world too. Facebook has enjoyed a position in the sun for a long, long time now – but it is not just content with suckering up the colossal traffic that it reaps every single day. Zuckerberg, like so many success stories before him, understands that adaptability is the key, and so has his sights set on companies that one wouldn’t even necessarily consider his competition: sites like Youtube, and Instagram. Hence why Facebook is boosting video content across the site; hence why the success of content creators depends entirely on their willingness to work with Zuckerberg, and to upload their work to his site.

It’s scary, but not too irrational, to imagine that soon almost every aspect of our online lives will be taken care of by a handful of privately owned sites that can and will do whatever they want with our data. If Facebook does indeed land a blow on Youtube and if Spotify absorbs all competition, and no longer feels the heat of its rivals against its back, then we could be left in a world in which consumers find themselves playing a game that they no longer have a stake in.

Because, when it comes down to it, companies like Spotify only play nice with us when they have to; and only come across as friendly, and wholesome, and eager to please as a way of getting to our wallets quicker than the other brands out their trying to do the exact same thing. And the moment they don’t have to do that – the moment the world of online music streaming becomes a one-horse race – is the moment that we, the consumers, lose out.

A Grim Future

“In my opinion, the value of an album is, and will continue to be, based on the amount of heart and soul an artist has bled into a body of work.” – Taylor Swift, The Wall Street Journal.

Making money as a musician is hard, and, the more Spotify gets its teeth into the world, is only ever going to get harder. Spotify pay 70 per cent of the revenue they make off streaming straight back to the rights holders, which sounds good until you realise chances are the rights holders and the artists are not one and the same. Exactly how rights holders dish out the earnings they have made off Spotify streams to artists is entirely up to them, and can often lead to situations where bands are making a matter of cents off streams, not dollars.

“You can’t survive on Spotify streams,” one anonymous artist told the BRAG, “but that’s really what most labels and agents are pushing for. They like to be able to use Spotify streams as a way of advertising their brand – they go, ‘Oh look, this band we have on our roster just got however many streams, isn’t that amazing?’ And it’s good for marketing in that sense, but it’s not really good for making money.”

Indeed, more and more musicians are turning to touring as their major source of revenue, marking a 180 degree shift from the way that the business of making music used to be conducted. Whereas touring was once seen as a necessary and yet regrettable way of spreading a band’s profile while sacrificing a huge amount of cash, now it is both a form of promotion and a significant money earner. “You take enough merch out on the road with you, go to enough rural venues, and you’ll make maybe just about enough money to live on,” the anonymous artist told the BRAG. “But that’s if you’re really lucky – if maybe you pick up some radio play, or have a single out that enough people want to go and see live.”

Of course, there’s no such issue for Spotify’s big earners – for the superstars whose albums are streamed millions up millions of times via the service. For them, the money adds up, and fast. Even if Drake is only making peanuts per stream, he has still been streamed 3.185 million times. With that kind of reach and influence, he never has to tour again, and could spend the rest of his life watching the revenue tick slowly upwards, as more and more people turn to Spotify, and to his tunes.

Which, needless to say, helps Spotify too. The company might only pocket 30 per cent of revenue, but when you consider how many active users the company has in its tow – 140 million using the service for free, and 50 million paying – it’s clear the real winners in the streaming wars are the companies big enough to hold the public attention in a stranglehold, and the artists that they work side by side with to achieve that.

In the process, what we are moving towards is a future where the only way to succeed creatively is to become very, very famous. Soon enough – maybe sooner than we think – it could become difficult for musicians to ever achieve a middle-tier of musical success. It’ll be all or nothing, and it’s hard to imagine that bands smaller than Arcade Fire and Beyonce but bigger than your local act playing covers down the RSL will get by without turning to their fans for support.

Which indeed, so many of them are doing, in the process paving the way for what might well be the only viable future for the bands who make up the middle-ground. Sites likes Bandcamp and Patreon allow fans to give (relatively) directly to their favourite acts, and as a result, means emerging creatives and independents can receive a boost they could otherwise never have gotten from giants like Spotify.

Of course, not all major, top tier musicians are happy to sit and eat crow, and many of Spotify’s biggest critics speak out not to save their own hides, but the hides of others. Eternally grumpy old man Thom Yorke has called the service the last farts of a dying corpse, and pop star Taylor Swift wrote a passionate explanation of why she spent so long resisting Spotify (that she put her content back on the service as a way of fucking with longtime rival Katy Perry is a genuine, heartbreaking shame.)

And indeed, though there is the temptation to be cynical – to argue that even comments from such respectable, successful musicians as the singer behind the chart crushing 1989 and the provocateur responsible for some of the most accomplished albums of this decade will do little to turn the tide against streaming – it is important that we don’t start becoming wearied. As with so many of the other issues and pressures we face today, the easiest – and not coincidentally, most damaging – thing we could do would right now would be to put our feet up and wait till this all settles down.

Because all this will settle down, but it will do so in ways that will hurt us down the line. The more power we give specific, individual streaming sites – the more we mock and belittle their competition, not to mention their most outspoken critics – the more jeopardy we put ourselves in as consumers. And for that reason, a world in which Spotify’s power is unchecked should not only worry the musicians who will find their revenue severed by the brand, but all who use the service; by all who, unwittingly or otherwise, are slowly feeding a swollen beast with nothing but the consumer’s wallet in mind.

This article originally appeared on The Industry Observer, which is now part of The Music Network.