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Music Distributor Pulls 200 Small Labels from Spotify and Rdio

By Wesley Fenlon

A report claiming streaming subscribers are less likely to buy music has spurred one indie distributor to remove all of its music from Spotify and other streaming services.

A recent study conducted by NPD Group and NARM found that streaming music services like Spotify and Rdio are detrimental to the sales of individual pieces of music. That might just be the Captain Obvious statement of the year--the entire draw of streaming platforms is being able to pay for access to a broad range of music. But apparently some labels hadn't quite put two and two together, or finally decided the compensation they got from streaming services just wasn't good enough.

Distributor STHoldings, which represents over 200 labels specializing in electronic music like dubstep, techno and skwee, has decided to pull its music from Spotify, Simfy, Rdio & Napster. And they're doing it with class, too--here's a quote from their press release. "They provide poor revenue and have a detrimental affect on sales. . .Quoting one of our labels 'Let’s keep the music special, fuck Spotify.' "

This story shouldn't be passed off as a doom and gloom example of music streaming's impending downfall. Even with 200 labels, STHoldings represents a very narrow slice of the music industry. However, if only four out of its 200+ labels requested to have their music stay on services like Spotify, is there a possibility larger distributors will pull their music, too? The loss of EMI and its many, many artists could be crippling.

As usual, it all goes back to money. How much can labels and their distributors make from Spotify and Rdio? STHoldings decision implies they're not making enough--possibly because they represent indie artists that aren't a big draw for music streaming subscribers. Spotify sees their partnerships in another way: they're getting people to pay for music again and widening the audience of listeners.

. . .the Spotify model is adding, and will continue to add, huge value to the music industry. Right now we have already convinced millions of consumers to pay for music again, to move away from downloading illegally and therefore generate real revenue for the music business.
In addition, ‘revenue per stream’ totally misses the point when considering the value generated by Spotify. The relevant metrics are: 1) how many people are being monetized by Spotify; 2) who these people are (usually young people previously on pirate services which generate nothing for artists and rightsholders); and 3) how much revenue per user Spotify generates for rightsholders.

An industry-wide poll of musical artists would add some interesting perspective to the debate. Are they being compensated enough? If not, is it because of the business deals made by their labels, or because the streaming model just doesn't provide the same payout as direct sales?

Labels have at least some investment in streaming's success--an article from 2009 revealed that major record labels owned something like 18 percent of Spotify's shares. Since Spotify doesn't talk specifics about royalties, it's hard to properly judge how valuable streaming services really are.

Right now STHoldings represents a blip outside the norm. Slow as the music industry is to adapt, its acceptance of Spotify and iTunes Match does show some change. If more distributors follow STHoldings' example, this could be the beginning of a worrisome trend for music streaming services. Music buffs will jump ship as soon as it looks like their selection will be compromised.