Spotify under fire?

Spotify opened it’s business in America this year, primarily to major applause and kudos. I’ve been particularly interested in the service and have been using it actively for 3-4 months now. Quite frankly, I love it.

But, many labels (mostly indie) have walked away from the service crying foul of the difficult to understand revenue breakdown and royalty mechanisms that pay artists. Even with that large number of labels walking and most recently one major global act (they who refer to themselves as Coldplay) refusing to allow its new album to be surfaced through Spotify, the service is claiming to have millions of songs available for streaming. More importantly, they have (allegedly) millions of users who are PAYING to stream their music as well.

Today comes Spotify’s most vocal response to this chatter (full article available here). Most interesting is the numbers they allude to in the piece. Specifically:

“It would take more than 100 years to listen to Spotify’s catalogue of around 15 million songs – one of the world’s biggest music libraries – and to which we add more than 20,000 new tracks every day. We have agreements with the four major labels and many thousands of smaller indie labels, and the overwhelming majority of our label partners are thrilled with the revenues we’re returning to them. We believe we offer the simplest, easiest and fairest music service in the world, and millions of our users across 12 countries would agree with us.”

I’m not sure how this particular issue will resolve itself but it speaks to a larger issue, “royalty democratization”. With the glut of service offerings (Rdio, Grooveshark, Rhapsody, Pandora, etc) and the one behemoth glaring at them (iTunes), the industry needs to step in and be the “bigger man” in the discussion and force a singular royalty mechanism. And if that can’t happen, then the industry has to at least take on a larger role in assisting at crafting one.

The space of digital music is getting more and more crowded with quality service offerings (btw, I LOVE Spotify so far) and each one of them has defined it’s own method of royalty distribution. Not one of these services is doing the same thing which understandably causes a great deal of confusion with labels and bands alike.

Hopefully in 2012, someone will step forward to provide a solution that is equitable and acceptable to all concerned. Of course, I am willing to concede that what I am asking for might not be possible either.