Will Spotify Mark The Beginning Of The End For Traditional Notions of Music Ownership?

I believe it is possible to imagine a future where the ownership of music will become a relic of the past. I’m not talking about the box of mix tapes sitting in your car; I’m talking about your CDs, your MP3 collection and even your legitimate MP3 collection that you purchased through iTunes. The way we listen to music is starting to change and the implications are huge for both musicians and music aficionados.

Spotify was released to the American public in the summer of 2011. If you haven’t used Spotify yet, here are some of the benefits. It will launch on your computer in less than ten seconds, you can choose from approximately 15 million titles and play them instantly, you can create and share playlists with other Spotify users, you can get information on bands and their catalogues and all of this is available for free.

Free Spotify service is only available on desktop computers and cannot be used without an internet connection. However, the service is arguably far superior to iTunes as it offers a similar number of titles, at no charge, with a faster play time on a software service that is considerably less bloated than the iTunes application. The only difference is that you do not own the material you listen to Spotify. While this material is constantly available, at no charge, if Spotify ceases to exist you could be stuck with the box of mix tapes in your car.

Viability

Spotify’s revenue comes from a combination of user subscriptions, advertisements and retail partnerships whereby Spotify attempts to sell music. Spotify in turn takes this money and then divides it between record companies based on the number of plays coming from their requisite collections. Although the service is popular, there is some question by record executives as to whether or not it is economically viable.

I see a fundamental flaw with a service that is providing instant access to an enormous amount of on-demand music, free of charge while also trying to derive revenue by selling the very product that is being given away for free.

With the reliability of modern internet connections, the ability to list and bookmark songs and artists within Spotify, the opportunity to interact and share music with friends and the ability to play almost any song free of charge, I see no need to continue purchasing music for the time being and I believe that eventually having ownership of any type of electronic media may become onerous.

What This Means For Artists

For a musician this may have some far ranging implications. Traditionally, musicians focused on securing record deals that would provide them with a large percentage of the gross revenues from the sale of their works. If we move to a post-ownership society, record sales could become non-existent. In this type of scenario musicians will need to pay less attention to the profit sharing associated with the sale of their works and they will need to pay more attention to their deals with performance rights organizations such as ASCAP or BMI.

Although the Spotify method of compensating artists might be considered more fair¹  as all artists become equally accessible on Spotify and accounting methods for how much a song has been played will be very accurate, this potential shift in artist compensation may still favor mega artists. Larger artists could be able to strike more favorable deals with performance rights associations, thereby depleting the amount of funds available to smaller artists.

If we move away from a music-ownership model, performance rights associations may become the focal point of the music industry and the traditional record contract could also be thrown out with the bathwater in the process.

 ¹ Additionally, although Spotify compensation packages are covered by non-disclosure agreements, The Guardian has reported larger labels have been able to secure better compensation rates than smaller independent labels due to the bargaining power associated with the size of their digital music portfolios. See http://www.guardian.co.uk/media/pda/2011/feb/01/spotify-royalties-indepe...

Louis Kroeck practices civil litigation at Anstandig, McDyer, and Yurcon in downtown Pittsburgh and is the co-Chair of the Allegheny County Bar Association’s Arts and Law committee. He received his B.S. in Information Science and Technology from The Pennsylvania State University and his J.D. with a concentration in Technology and Law from Case Western Reserve University. Louis writes for Demand Studios and contributes to local legal journals and other publications.