Together, Spotify and artists have killed the album, perhaps bringing music copyright down with it
Analysis of Spotify’s F1 filing for its impending IPO have all rested on the fundamental assumption that power in the music industry flows from copyright control, and for Spotify to achieve sustained success, it’ll need to either gain leverage such that it can negotiate better copyright licensing deals or it’ll need to acquire its own copyrights.
This is incorrect. In fact, the long-term success of truly disruptive startups has long depended on upending old business models and creating value in new ways.
Spotify lost $1.5 billion in 2017, illustrating the current music industry dynamics that have made it nearly impossible for any digital music startup to build a sustainable business. The “problem” with Spotify has always been that the record labels own the copyright to the music, forcing Spotify to pay nearly 70 percent of its revenue to them in royalties.
Thus, Spotify’s margins are completely at the mercy of the record labels and the deals Spotify must cut with them. Generally, new music is granted a copyright for the life of the artist plus 70 years. The labels’ power stems first from their control of copyright on new albums. From this, they control distribution, marketing, and sales. But, both Spotify and artists may be pushing towards a future—inadvertently or not—where the album format, and thus copyright itself, is no longer relevant. This puts the labels in a precarious position and gives the streaming companies and artists an opportunity to explore new, innovative business models.