Taylor’s Back to 1989…
Taylor Swift playing hard-to-get with Spotify is frustrating for many music fans around the World and for the Swedish streaming leader, but ironically, the entire drama around this break-up has created a huge, free marketing wave for the Viking growth company. (Disclosure: GSV owns shares in Spotify)
In a direct response to Taylor’s decision to pull out of Spotify, CEO Daniel Ek wrote a great post explaining his company’s impact on music artists and the industry in general. Given the strong momentum of both, Taylor and Spotify, she would have earned an additional, estimated $6 million over the next twelve months, would she have stayed on Spotify, according to Ek. Her label manager, Scott Borchetta, quickly went on to counter Ek in a Time Magazine post, stating that she only received $500K from Spotify last year. This figure is somewhat misleading, and cherry-picked, as it is U.S. domestic revenue only, (which is approximately 1/4th of her global revenue thru Spotify), and it is historical. Ek’s numbers are annualized on a forward basis, and based off of her current monthly revenue.
Similar to Spotify, Taylor Swift is one of the top growing brands in music, and her forward earnings estimates are accompanied by high visibility. Her Spotify-only earnings over the last 12 months were $2 million, and they would have been an estimated $6 million over the next 12 months, and then possibly a double again the year after, if she had stayed…
Even without Taylor, Spotify continues to post very strong momentum, and has now over 50 million users with 12.5 million who pay approximately $120 per year. The growth is quite remarkable, considering the user stats are up from 36 million users and 8 million paying users at the start of the year. Additionally, Spotify has paid out $2 billion in royalties to artists since its inception in 2008, which is up from $1 billion just a year ago! As a comparison, YouTube which has well over 1 billion users, has paid out just over $1 billion to copyright holders since its inception in 2005.
Source: Company announcements, GSV
U2’s Bono spoke at the Dublin Web Summit a week ago and talked about how streaming services are transforming the music industry. He applauds what Spotify has done to music piracy — essentially eliminating it, and how it’s created much needed transparency in the music business. For decades, major record labels were keeping large chunks of revenues, leaving little left to the artists. Disruptive leaders Spotify, YouTube and Berlin-based SoundCloud are bringing the much needed change: today, talented artists don’t necessarily need a record label to support them to become famous. If their work is great, it can spread quickly to the top of the ranks. This was nearly impossible in the pre-YouTube/Spotify/SoundCloud era.
So back to Taylor Swift — I won’t be surprised if her decision was influenced by her label manager Scott Brochetta. For the reasons above, his incentive would be strong to do so as he and his label are those that are getting disrupted. Taylor pulling out of Spotify is like she is moving back in time — maybe back to 1989, but I’m sure it won’t be too long until she re-joins again, and shakes it off.
As published in A 2 Apple http://bit.ly/11h3xhS
