“We’ll get the response of the music community almost as quickly, via social media for musicians,” we wrote yesterday, in our report on Spotify testing a ‘Discovery Mode’ that will enable artists and labels to flag particular tracks to the recommendation algorithm for its radio and autoplay features, in exchange for accepting a discounted royalty rate.
Well, the social media response from musicians is in, and if you work for Spotify you might want to pour a stiff gin before scrolling through the quote-retweets for our tweet about the news, or those for The Fader’s post on the story. It’s fair to say that a lot of independent artists are deeply unimpressed.
Some common themes jump out. A lot of people are calling Discovery Mode ‘payola’ or ‘rent-seeking‘; many are pointing out that lower royalties is exactly the opposite of what recent artist campaigns have been asking for; there are plenty of recommendations of Bandcamp; umpteen variants on the ‘I didn’t think Spotify royalty rates could get any lower’ joke; and a barrage of ‘f*** Spotify’ tweets.
“Spotify’s share price in the coming hours will be a quick indicator of what Wall Street makes of Discovery Mode,” was another thing we wrote. A bump has yet to manifest itself: at 1pm when the announcement was made, Spotify’s shares were trading at $230.45, and they closed the day three hours later at $231.60. With it being election day in the US, we suspect share prices may be bouncing around a bit for the rest of the week, making this metric probably useless from tomorrow morning for tracking reaction to Discovery Mode.
Spotify will have been expecting the negative response from artists, and it clearly didn’t put the company off launching the test – which, as we pointed out yesterday, could be shut down relatively quickly if Spotify feels the heat is too great, or if its strategic objectives change.
It will need to keep tabs on the ‘payola’ criticism though. Particularly in the US, that’s a very loaded word historically, and could ping some radars in policymaking / regulatory land. We wouldn’t be surprised to see Apple seize on it too: with Spotify attacking that company alleging anticompetitive behaviour as a platform owner, having the ‘p’ word floating about isn’t an ideal situation for the streaming service.
As the initial furore settles, though, the music industry will be modelling the economics of Discovery Mode carefully. There’s still a sensitive series of questions at the heart of this. If artists opting in see their autoplay and radio streams boosted, does that mean those not using the scheme will see theirs decline? If that’s the case, will there be pressure on artists to opt in if and when the feature opens up to all?
If the majority of artists opted in, would that dampen down the stream-boosting factor, leaving lower royalties for all as the principal impact? But also, if the majority opt in, will that strengthen Spotify’s case for expanding this system to recommendations elsewhere on its service?
We’re not predicting all this as inevitable: Spotify may have strong answers to assuage these fears. Our point is that it will need them. There’s a Parliamentary Inquiry into streaming economics underway in the UK, and a US campaign by the Union of Musicians and Allied Workers (yesterday’s tweet: “This is payola. Sign onto our Justice at Spotify campaign to demand an end these practices”) angling for the attention of policymakers.
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