If the music industry agreed on one thing – and it rarely does – it was that the web streaming service Spotify was the future for a business ravaged by piracy. But Chris Martin has dealt a possibly fatal blow to that assumption after Coldplay refused to license their new album to Spotify, which now faces a revolt from some big artists.
EMI, Coldplay's record company, is said to be "embarrassed" after it's star act declined to allow Spotify's ten million users to listen to Mylo Xyloto, the band's new album. EMI, whose music division could be sold today in a $1.5bn deal by owners Citgroup, negotiated a deal to license its music to Spotify, in which it also owns a stake of under 2 per cent.
The Swedish-founded, UK-based Spotify has transformed the way music is listened to by fans since its 2008 launch. Spotify lets users stream a catalogue of 15 million songs to their computers and mobile phones through a monthly subscription or listen via an advertising-supported free service.
With CD sales suffering a 40 per cent collapse since 2001, Spotify was hailed as one of a handful of legal digital services which could lure fans from pirate sites and restore industry revenues.
But artists are in revolt after discovering they are receiving few royalties compared with CD sales, despite earning thousands of plays on Spotify. The service pays 0.085p per stream, which is split between the publisher and songwriters.
Coldplay declined to give a reason for their decision but it follows Adele's refusal to place her 21 album on Spotify. She has sold 10 million CDs and downloads this year, defying claims that albums could no longer sell in large volumes.
Tom Waits also joined the rebellion, declining to place his new Bad As Me album on Spotify, Rhapsody, Deezer and the MOG streaming services. Major catalogues such as those of The Beatles and Pink Floyd are also unavailable.
Jazz Summers, manager of The Verve and La Roux, said: "Everyone told La Roux they were listening to her album on Spotify. We looked at her royalties from thousands of plays and she basically got nothing. She said: 'Sod it, I'm taking it off. The royalties are barely enough to pay for a set of guitar strings'."
Spotify, co-founded by Daniel Ek, is valued at $1bn and has just launched a major link-up with Facebook, designed to allow the social network's 800 million users to share music.
With this increasing influence has come "arrogance," Mr Summers said. Spotify executives recently held a meeting with Britain's leading music managers and after making a presentation, refused to take questions. "That went down badly," said Mr Summers.
While snubbing Spotify, Coldplay gave rival iTunes exclusive plays of Mylo Xyloto and is promising those who make a £7.99 purchase on the Apple service a superior sound quality download. Amazon is selling the album, which has sold 150,000 copies so far this week in the UK, for a heavily-discounted £3.99. There have been suggestions that Coldplay want Mylo Xyloto to be listened to as a "cohesive whole" but it is for sale as "unbundled" tracks on iTunes.
EMI said: "We always work with our artists and management on a case-by- case basis to deliver the best outcome."
Company sources said the days of "controlling" where artists like Coldplay sell their music were over and that EMI worked with musicians and managers on collaborative release strategies.
Mark Mulligan, a digital music analyst, said: "Coldplay have made a business decision that they can generate more income and album sales through iTunes and Amazon. That is worth more to them than the widespread exposure to their music that Spotify offers. But few artists have the firepower to dictate terms to their record labels."
Like EMI, other major record labels – Warner, Sony and Universal – also purchased a stake in Spotify and that has become a source of conflict with their artists.
Mr Mulligan said: "Spotify works better for record labels than artists. They are stakeholders so they get a share of joint venture income from every stream, which doesn't have to be shared with their artists." Mr Summers accuses the record companies of "double dipping".
Mr Mulligan believes Spotify should be seen as a "promotional tool" by musicians, who will have to work harder to earn revenue through live performance and songwriting income.
Spotify retains the rights to stream Coldplay's earlier albums and is offering a new single from the new record. "We have strong support from the industry," said a spokesman. "We of course respect the decision of any artist who chooses not to have their music on Spotify.
"We do, however, hope they will change their minds as we believe the Spotify model is adding, and will continue to add, huge value to the music industry."
Despite snaring two million paying subscribers and recording a five-fold increase in revenues last year, Spotify's pre-tax losses rose to £26.5 million, partly due to increased royalties payments.
There are doubts about the long-term viability of its "freemium" model and Spotify has severely restricted the amount of free music listeners can receive.
The artist revolt could escalate, warns the British Academy of Songwriters, Composers and Authors. Patrick Rackow, Basca chairman, said: "It's a great time to be a music fan – there are more sources of music than ever before, most at a click of a button, but this does not mean the artist should feel pressured into being ubiquitously present on all services."
However, musicians could ultimately see the benefit to their bottom line.
A spokesman for Rhapsody said: "With streaming, if someone plays a song a million times, the artist will earn money from that. Music acts could potentially make more money."
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