Artists Question Spotify’s Payment Structure

Some of the biggest music acts in the industry are saying no thanks to music streaming services such as Spotify. Why? The music just doesn’t sound that good.

Adele, Coldplay The Black Keys, and Tom Waits are some of the giants who are not making their albums available on Spotify. Users pay monthly fees between $5 to $10 to either listen to an unlimited amount of music or for free with advertisements; artists can earn money from these services each time one of their songs is played.

Some believe the revenue isn’t equal to what the artists would receive from outright sales, according to Bloomberg.

Dave Holmes, Coldplay’s manager has said, “I am very concerned. Spotify competes with download stores like iTunes.” Coldplay’s album, Mylo Xyloto which was released in Octoberwill only be available for purchase for several months.

Holmes added, “Like all of Coldplay’s other titles, the new album will be on [Spotify] eventually.”

Also causing problems from the Spotify artist revolt is the effect on music-industry executives. Prior to its July U.S. debut, Universal Music Group (VIV:FP), Sony Music Entertainment (NYSE:SNE), Warner Music Group and EMI Group, received large advance payments from,and equity stakes in Spotify. The labels don’t have control over which musical acts support Spotify, according to Ted Cohen, a former EMI digital chief.

Some musicians have contracts clauses giving them digital distribution controls and others just do what they want. According to Cohen, “If Lady Gaga doesn’t want her latest album on Spotify, her label will listen or she may get a creative flu or miss certain promotional appearances. A recording artist can be petulant.”

While Spotify may have artists not supporting them, the service does come with supporters. Behind iTunes, streaming services are the second-largest source of revenue for the recording industry. Spotify has paid about $150 million to rights-holders in 2011, as compared to $55 million in 2010, according to Bloomberg.

For albums such as Drake’s Take Care which was available on Spotify, it found immediate success, going platinum in five weeks. Coldplay may not share the enthusiasm about Spotify but its label is encouraged about streaming, “Services such as Spotify are currently generating more revenue per user to EMI and our artists than the average digital music consumer generated in a world without these services,” says Mark Piibe, head of business development for EMI.

Figures aren’t public but an average iTunes customer will spend about $60 per year but a Spotify subscriber in its top tier of service will spend twice this amount.

It took awhile for artists to come around for iTunes, maybe the same thing could happen for Spotify, noted Justin Bieber’s manager.

To contact the reporter on this story: Debbie Baratz at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com