Digital music streaming hits major snag as over 200 labels sign off

Summary:Is digital streaming a waste of money for the music industry, or are the labels just too uncomfortable with change?

Digital music streaming is becoming a popular market, but not everyone is so enchanted anymore.

Major distributor STHoldings, which represents more than 200 labels, is withdrawing its entire catalog from Spotify, Napster, Simfy and Rdio. Most of the labels are on the smaller side, but here's a full list.

The reason seems to stem from a study conducted by NPD Group and NARM (the Music Business Association) that found streaming music is damaging to record sales.

Here's STHoldings' official response:

STHoldings can confirm that we have taken the decision to remove all STHoldings distributed content from the following music services, Spotify, Simfy, Rdio & Napster.

Despite these services offering promotion to many millions of music listeners we have concerns that these services cannibalise the revenues of more traditional digital services. These concerns are confirmed in our own accounts and a recent study by NPD Group and NARM

As a distributor we have to do what is best for our labels. The majority of which do not want their music on such services. They provide poor revenue and have a detrimental affect on sales. Add to that, the feeling that their music loses its specialness by its exploitation as a low value/free commodity. Quoting one of our labels “Let’s keep the music special, fuck Spotify”

All the labels we represent have been given the choice to have their music to Spotify, Simfy, Rdio & Napster. As of today (16.11.11) from the 200+ labels we distribute, 4 have expressed that they would like to be on these services.

Everything was starting to look so good for Spotify. Traffic was increasingly steadily as were the number of paid subscribers following the digital streaming service's U.S. launch earlier this summer.

But the example of major groups like Coldplay not letting their latest album be available for streaming (on a limited or unlimited basis) within Spotify's catalog should have served as a major warning sign.

Nevertheless, the music industry is notoriously stubborn against change, and this could be read as just another example of being afraid to innovate -- a mistake that has proven dire and costly for the business as a whole over the last decade.

Spotify seems to think that the music industry is missing the point of digital streaming subscriptions. Wired published an official response from the service, and here's an excerpt:

Artists can — and do — receive very substantial revenues from Spotify, and as Spotify grows, these revenue streams will naturally continue to grow. Spotify is now the second single largest source of digital music revenue for labels in Europe (IFPI, April 2011) and we’ve driven more than $150 million of revenue to rights holders (ie whoever owns the music, be it artists, publishers or labels) since our launch three years ago.

Related:

Topics: Google

About

Rachel King is a staff writer for CBS Interactive based in San Francisco, covering business and enterprise technology for ZDNet, CNET and SmartPlanet. She has previously worked for The Business Insider, FastCompany.com, CNN's San Francisco bureau and the U.S. Department of State. Rachel has also written for MainStreet.com, Irish Americ... Full Bio

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