Spotify is probably the online music service which is generating the most headlines at present. In the last couple of weeks alone we have had analysts ‘guestimate‘ it’s potential turnover and costs, trying to paint a rosy picture. We have also had top record industry execs claiming the business will not exist in a years time and additionally, we have had Spotify themselves claiming that the business approach from labels is not helping them to survive which will ultimately only hurt the industry as a whole.

Why so? Well the labels need there to be legitimate companies selling and distributing their content. Without them, we the consumer, will have no choice BUT to go to illegal filesharing sites. However the labels also want to get a decent return on their property, otherwise whats the point - right? The problem is many of these online businesses, Spotify included, are still experimenting with what business models, or selection of models (in the case of spotify) will work and be sustainable.

Spotify is offering everything from subscriptions, to free content but with adverts, to downloads claiming they want to appeal to all types of consumers. Its clear though that they are also not too sure which, if any will work. So whilst I quite like the idea that there is a choice element in Spotify’s charging menu, it’s also clear that they don’t really know which options will stick.

In recent years some labels have been making investments and buying stakes in these sites, and clearly thats the way forward. After all, if I was Spotify and I DID have an audience of 6 million it would be substantially cheaper to create and commission my own music and market directly at the 6 million strong audience. Accordingly, if I was a label and wanted an audience of 6 million listeners I would buy Spotify and use it in the same way that labels used to use their own record stores many, many years ago. Perhaps the types of deals and contracts offered to artists, producers and all those involved in making the content need to ‘wind back’ to the 60s where people were salaried, perhaps with a milestone clause to protect the creatives - i.e. if the music generates over ‘x’ amount of revenue then the contract kicks into a bonus structure, more akin to a current deal structure. What do you think?

Spotify is now looking at launching their own branded music phones, which will bring them in direct competition with Nokia ‘Comes with Music’ and Sony Erricson’s offering - along of course with the Iphone. Is this a wise move? Certainly having an Iphone app makes sense, but would you buy a phone especially to gain access to the Spotify network? Im not so sure.

The argument about whether the mechanical copyright (the copyright covering the actual sound recording) should be extended in the UK was always going to be resolved from a European Perspective, and the EU has now taken the lead and voted on the way forward. The European Parliament has voted on an extension to the current life of the copyright. 

However, the EU will still differ from the USA on a number of very important points. The most obvious is that the term is 70 years in the EU and not 95 as in the USA. Additionally, there are greater revenue sharing mechanisms in play revolving around a scheme where Labels pay 20% of the additional income gained (from the extra years) into a benevolent fund designed to support performers and sessions musicians. Similar to the USA there is also a clause which makes it mandatory that after 50 years the acts can renegotiate their record deals.

Although, this is clearly a step in the right direction, and does give more power back to the artists I still can’t see why they couldn’t have let the right to copy be handed over to the market place. There is still an argument that if a label can’t make good money from a copyright over 50 years, then the extra 25 won’t help, and if they DID make good money in the first 50, then why should they make more over another 25? And why 70 years and not 95? Why 70 and not 75, or 70 years after death as with publishing? These seem to be arbitrary numbers based on what people ‘feel’ is right. 

Im still a fan for it expiring after 50 years and then the music being sold in a competitive environment. Labels would pay good money to have their copies remastered, perhaps adding extra content so that way their version stood out from the artist’s own version who would be free to sell their copies. I see no downside to this and its more in line with where the industry is heading anyhow which is one defined by open access, low level ‘direct to artist income streams’ with less and less ‘labels’ involvement in the production. 

Are artists in the Long tail who produced their own music, did all the performing and singing going to have to pay 20% of any income derived to the benevolent fund after year 50 of the copyright, even if no one else was involved in the production or performances on the recordings? One wonders if this law is a last ditch effort of acts and labels, who are part of the ‘old industry’, to hold back the tide of change?

The demise of Spiralfrog has highlighted the reality of the ‘music for free’ model. This reality is simple: music is not free and costs to listen to and own. The record labels knew this and hence charged Spiralfrog a premium for granting access to their content. 

Unfortunately they did not have a strong enough business model and did not sell other services or generate enough income from advertising to be able to afford the music. This is interesting, as it demonstrates to consumers that the idea that there is no cost to music is phoney. Certianly Spiralfrog users now understand that there is a cost, because their service no longer exists.

However, one assumes that they will just migrate to another free music service such as Spotify. Spotify are clearly learning from the Spiralfrog story and has now announced that it will start to offer paid downloads via 7digital. 

Record labels want these new, legitimate services, to exist but then charge such high fees from them, they end up not allowing these services to bed in and grow. Hence, it is impertive that new music web ventures have a range of income sources from day one of launch. Especially in a market where advertising income on the net is down from anywhere from 2-20% depending on the sectors targetted. 

Meanwhile the Itunes music download service will start to vary the pricing structure of songs within its library. Some would argue that the timing is awful, as the industry as a whole is still struggling and we are in a recession, but the idea of increasing the COST of downloading music is interesting. Perhaps Apple is seeing if the legitimate download market is now becoming a way of life for many users rather than something to ‘play with ‘ on the side of their traditional music consumption habits. Accordingly they are testing the market to see if they can squeeze value back into certain recordings.

One thing is for sure, good music costs money to find, nurture and produce. Perhaps the re-education of the public has started?