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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?

Rachel King

By for Between the Lines |

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.

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23 comments
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  • Wouldn't you be stubborn against change if it lost you money?

    If you got paid a flat rate per article as opposed to getting paid based on the number of replys, and you actually received less money, you'd be stubborn against change, yourself.

    What the issue here. Not everything is a better money maker then the thing before.
    William Farrell
    Reply Vote

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

      @William Farrell

      So then I guess by the same logic, labels should be pulling their songs from Top 40 radio too...but they aren't....the only difference with Internet radio and streaming is that it's being done electronically.....

      The labels are being stupid and shortsighted....
      Doctor Demento
      Reply Vote

    • Well now they get nothing

      @William Farrell
      Since they were getting [i]something[/i] before, they'll get nothing now. 'Smart' move.

      lol...
      ScorpioBlue
      Reply Vote

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

      @William Farrell <br>That's life. We are now or will be typewriter repair people. Copyright laws enable some degree of leverage for media. Still, if one looks at the laws and publishing agreements, one sees reference to mechanical reproduction because player piano rolls were the "recordings" of interest originally. When times change, they change.<br><br>Oh, the music industry loves streaming. It's pay per performance/listen. That's the dream, man, people hear, someone pays, and only the content owner keeps the track.<br><br>I guess it's STHolding's problem that not enough people are requesting their tracks for streaming. Pulling from a streaming service won't really address that. Another of STHolding's problem is that revenues from other income sources are not sufficient.<br><br>Music Business Rule 1: you can't sell what people haven't heard (unless it's by a musician people have heard of, in which case it sells better when people have heard the music).<br><br>Streaming is like radio, except the radio station doesn't pay you and the streaming service will make some effort to connect the audience with related but new music, i.e., a new sales opportunity. If Universal pulled its tracks from radio because the (non-existent) revenues* didn't replace lost track sales, you would say the looney bin is bordered by Lankershim. (Well, maybe not you, but they're over the hill from me.)<br><br>Here's my guess what's going on. STHoldings is doing this as part of negotiations for a higher licensing fee, or some other streaming service will pay STHoldings for exclusivity rights.<br><br>Or they are crazy.<br><br><br>*Promotional costs in legal and not-so-legal forms actually make getting songs on the radio a material expense which record companies pay and still they don't get all their tracks played. This may be changing. The internet may have disrupted payola.
      DannyO_0x98
      Reply Vote

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

        One other thought.

        This could be about how the if-you-liked-this-you'll-like-that algorithms are not favoring STHoldings' labels' artists, so there's no streaming revenue and no sales from newly introduced listeners.

        Though, if that was the case, I sure as shoot would say that in my response instead of some whiny twaddle about revenues from other sources and a gratuitous slam of a streaming service that just landed in the United States a couple of months ago.
        DannyO_0x98
        Reply Vote

    • Think about it

      @William Farrell
      Presumably the complaint is that those services did not generate the same amount of revenue as CD sales. However, CD sales are falling in the face of digital music sales, and NOT having any revenue from Spotify et al means these labels will probably be [i]worse[/i] off.

      BTW, the plural of 'reply' is "replies", and check the difference between "then" and "than" in the dictionary, please.
      rahbm
      Reply Vote

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

        @rahbm CD sales had peaked around the time that Napster started out. The CD sales was a bubble, after most people replaced all their vinyl with CDs, that went back to buying music at the normal historic levels. The music companies failed to adjust to digital music until it was too late.
        owlwise@...
        Reply Vote

  • I don't get it

    People who were buying tracks from iTunes are still likely buying them. People streaming from Spotify are either no longer getting them from Limewire or have turned to Spotify as opposed to listening on Youtube. The way I see it, Spotify is monetizing listens that would have otherwise earned them nothing.

    Leave it to a record label to complain about another company willing to do the legwork to monetize a crowd that shunned the pay-per-download model.

    Joey
    voyager529
    Reply Vote

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

    Years ago when the music industry copped an attitude our family decided not to purchase any more music. Prior to the music industry attitude shift we would spend from $100-$200 a month on music and videos. Surprise, surprise, surprise, we now have much more money for other important activities the family enjoys more.<br><br>LOL, Bubba Jr. and Missy Bubbett are enjoying themselves much more, while big Bubbett likes having more money for fun and savings. We want music we turn on the radio; family is happy life is good. All around we win music industry loses. Oh-well.
    BubbaJones_
    Reply Vote

  • Stupid, Stupid, Stupid

    Their existing business is dying anyway, therefore they're not going to adopt any new business model that might hasten the end. They'd rather cling to their fast-sinking shipwreck as it circles the plughole, and invest their dwindling resources on attacking their own customers for "piracy".

    Way to build a prosperous business, guys.
    ldo17
    Reply Vote

  • Greedy, Greedy, Greedy.

    If I understand correctly, these artists do get paid every time I listen to spotify and Pandora. If they're not happy w/ the compensation, they need to re-negotiate. If they think they can do better elsewhere, let them. I personally feel they are mostly greedy, and I don't choose to play the game. When Pandora and spotify get too expensive for me, I will stop using the services (just like I did w/ Netflix). So G** bless the free market system, and I wish you guys luck, but it will probably be without my dollar.
    dpricepac
    Reply Vote

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

    Too funny -- this has nothing to do with the artists..they're clearly too stupid to realize it's the execs that get the biggest chunk of money right off the top.
    TheSameAsBefore
    Reply Vote

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

    Really? They wrote a a response with affect instead of effect and used profanity against a downstream distributor?

    Who was paying their license fees? Who didn't go into business to drive music labels and artists out of business? Who were thriving because they were connecting people with music in a way the people prefer?

    Good luck to STHoldings: I think this is not going to go well for them. And when the official responder's position opens up due to involuntary termination (someone will have to be sacrificed in order to get back on Spotify), let me know and I'll send in a resume.
    DannyO_0x98
    Reply Vote

    • RE: spelling and grammar

      @DannyO_0x98
      Nobody is perfect, and I would bet they can spell "licence" correctly! <grin>
      rahbm
      Reply Vote

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

        @rahbm

        Perhaps you should check the dictionary before you slam someone's spelling. The misspelling is yours, not DannyO_0x98's.
        clfitz
        Reply Vote

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

    Sure it drives sales away from "traditional digital services" because they all suck!<br><br>Coldplay and STHoldings are uber stupid. All they're achieving is people going to download their work from torrents etc...<br><br>Why would someone who's agreed to legally pay a monthly fee for "all their music" then agree to pay again?<br><br>They may make more per album sold through CD/MP3 than streaming but those revenue streams are patently not working. The future for the artist to make serious money is live shows and it has been for some time now.

    Besides Coldplay and Adele are millionaires. No one is suggesting they give their work away but times are changing. Stop being so greedy.
    bradavon
    Reply Vote

    • Greedy?

      How much of your work do you give away for free?

      @bradavon
      GoPower
      Reply Vote

      • How much of your work do you give away for free?

        @GoPower Because we all got paid for our contributions to this discussion, did we?
        ldo17
        Reply Vote

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

        @GoPower
        I think you will find that streaming services are NOT free.
        rahbm
        Reply Vote

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

    @GoPower

    Was old school FM radio for free? I never paid for it.

    clue clue doh doh
    ScorpioBlue
    Reply Vote
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