Photo: Jordan Walker, Artist/Label Relations at Spotify, accepts Spotify’s FlashFWD Award for Best in Discovery from rapper Talib Kweli. Photo courtesy Nicky Digital.

Article by Keith Nelson, Jr.

In 2008, the late Steve Jobs claimed “people don’t read anymore” in response to the question of if Apple will enter the eBook business, and by the end of the following year, sales of eBooks went from $63 million to over $165 million. Apple eventually entered the eBooks arena with the iPad and is still a business juggernaut, however, this was a clear example of a company of dominance skewing their perception of changes in human life. Usually the true mark of sustainability is having a mentality which is rooted in delivering a useful product while actively discovering trends in human behavior to continuously shape such a mentality. After just three years, Spotify projects over $850 million in revenue for 2012 and with endorsements from everyone from Trent Reznor to President Obama, they have intertwined themselves in the music industry. We chatted with Jordan Walker, Artist/Label Relations at Spotify, who also accepted Spotify’s FlashFWD Award at our ceremony on Tuesday, to see if the burgeoning company’s vision is rooted in reality or hubris.

The new fan

“For many of our premium users, this is the first time in their lives that they are paying for music.”

2002 feels like a century ago. Sarah Michelle Gellar was slaying vampires, a Big Fat Greek Wedding grossed over $300 million, and over 7 million people were pirating music on Kazaa alone.  A decade later and vampires now rule television, Kim Kardashian received millions of dollars for a 72 day marriage, and there are over 13 million paid music service subscribers according to the International Federation of Phonographic Industry. Spotify claims they are “cannibalizing piracy and bringing a new revenue stream.” While music piracy is far from eradicated, The Pirate Bay, Megaupload, and other many other file hosting sites have been significantly scaled back after the recent influx of governmental attacks. It has taken over ten years, but companies are moving in to capitalize on such a trend. According to the IFPI, over 500 legitimate music services are in operation, and by the end of 2011, Spotify accounted for about 1/5 of those paid subscriptions.

The new artist

“All artists, be they independent, major label, household name, or up-and-coming, benefit from Spotify.”

The biggest gripe voiced by some musicians and labels regarding Spotify relates to its terms of compensation in comparison to other modes of release (iTunes, physical CD, etc) due to its still developing fanbase. Spotify’s 3 million paid subscribers is far from enough users for the music phenomena to be an artist’s main revenue system with paid streaming services still in its infancy. Walker believes Spotify works in conjunction with digital and physical downloads and not as a replacement, and claims, “Spotify can help drive physical and digital sales all the while helping to curb piracy. We see this on a much larger industry scale when looking at our founding home, Sweden, where one out of every 3 citizens uses Spotify and yet the download market continues to grow.”

Walker ensures Spotify pays 70% of their subscription based revenue to the rights holders and attests that the company offers artists exposure to potentially millions of new fans through its Facebook integration. “Users can discover new music, dive into an artist’s deep catalog, buy tickets to their shows and become life-long supporters, all the while turning on new fans out of their network of friends.” He further adds that artist should be monetizing each of these individuals for a very long time” since most “will continue to listen to music until the day they die.”

Is a market with Spotify being perceived as unsustainable by some artists because of the company’s still-growing user base, or are the “traditional artist” setbacks becoming more glaring with the emergence of streaming services?

Traditionally, an artist is signed to a record label which handles everything from music releases and recording to promotion and distribution. This affords the artist less financial responsibility and a wider range of resources yet more individuals get a portion of the artist’s revenue as a result. In 2011, Mac Miller became the first artist in over 15 years to independently release an album that debuted at #1 on the Billboard 200 chart. He will tell you himself that his rise to fame came from years of free music being streamed and downloaded freely along with direct contact with his fan base. He even released an entire mixtape with no prior announcement to commemorate reaching 1 million Twitter followers. In the same year, Belgian-Australian musician Gotye utilized Google+’s Hangout feature to group video chat with five of his fans two months after he released “Somebody That I Used to Know” on his own imprint, Samples ‘n’ Seconds. By the end of April, “Somebody That I Used To Know” topped the charts in 18 countries (including the U.S.) and amassed 542,000 digital downloads in a week (a new record). Both Mac Miller and Gotye have their albums streamed on Spotify.

The New Industry

“Streaming is an important part of the new music landscape and the industry as a whole will continue to see streaming further influence the charts.”

On March 14^th, Billboard began the On-Demand Songs chart which ranks singles according to how many times the song is played on Rdio, Rhapsody, MOG, Slacker, Muve Music, and of course Spotify. In addition, digital sales increased by 11.3% in 2011 while the streaming industry also experienced a boost in both sales and paid subscriptions. It looks like streaming and selling can play nicely after all, and even help one another. How far can the streaming industry go? Will we ever see the first ever record label/streaming service? Spotify Records? Walker ruled out this possibility by reiterating Spotify’s stance of remaining a tech company focused on scaling their user base and building their platform. However, when asked if Spotify will eventually begin selling music similar to iTunes, Walker’s “we have nothing to announce right now” reply leaves the possibility out there. The world is changing, and to paraphrase hip hop lyricist Kendrick Lamar, (whom Walker personally listens to on Spotify), Spotify seems to be in the dead center, looking around. And forward.

Keep listening, people.

Keith Nelson Jr. is a music appreciator bordering on elitist trying to connect all the dots. He graduated from Syracuse University in 2010 with a B.A. in English & Textual Studies. Tweet at him at @JusAire.