Taylor Swift pulled her catalogue from Spotify last week, which set off a nationwide debate over the music streaming service.
"If I had streamed the new album, it's impossible to try to speculate what would have happened," Swift said. "But all I can say is that music is changing so quickly, and the landscape of the music industry itself is changing so quickly, that everything new, like Spotify, all feels to me a bit like a grand experiment. And I'm not willing to contribute my life's work to an experiment that I don't feel fairly compensates the writers, producers, artists and creators of this music. And I just don't agree with perpetuating the perception that music has no value and should be free."
On Tuesday, Nov. 11, Spotify co-founder Daniel Elk offered a rebuttal and estimated that Swift would have made $6 million from Spotify streaming by the end of the year.
His argument included "three myths," including "free music for fans means artists don't get paid."
Elk believes that Spotify's free service leads to more premium subscribers, and therefore more cash for artists.
"Our free service drives our paid service," Elk wrote. "Today we have more than 50 million active users of whom 12.5 million are subscribers each paying $120 per year. That's three times more than the average paying music consumer spent in the past. What's more, the majority of these paying users are under the age of 27, fans who grew up with piracy and never expected to pay for music. But here's the key fact: more than 80 percent of our subscribers started as free users. If you take away only one thing, it should be this: No free, no paid, no $2 billion."
The mathematical takeaway is still slightly unimpressive, but better than piracy, as Elk said.
By his logic, 500,000 streams count as one play from a moderately sized radio station. According to Elk, this is worth "three to four thousand dollars." We're not sure why it's an estimate with $1,000 worth of variance — shouldn't the payment be fixed per stream? — but if we roll with the lowest payment ($3,000), artists are getting paid $0.006 per stream — less than a penny.
A listener would need to play Swift's non-deluxe 1989 more than 128 times for her to make $10, the average price of a new album in today's market.
If you believe that streaming hurts sales revenue, then those numbers are bad.
But Elk believes streaming helps sales.
"This is classic correlation without causation — people see that downloads are down and streaming is up, so they assume the latter is causing the former," Elk wrote. "Except the whole correlation falls apart when you realize a simple fact: downloads are dropping just as quickly in markets where Spotify doesn't exist. Canada is a great example, because it has a mature music market very similar to the U.S. Spotify launched in Canada a few weeks ago. In the first half of 2014, downloads declined just as dramatically in Canada — without Spotify — as they did everywhere else. If Spotify is cannibalizing downloads, who's cannibalizing Canada?"
$2bn and counting - https://t.co/qExp7iqdqb
— Daniel Ek (@eldsjal) November 11, 2014