White Collar Criminals



Prosthetic RecordsSpotify

Century Media and Metal Blade now have more company in the room: Prosthetic Records is pulling out Spotify, according to an article at L.A. Weekly that includes quotes from Prosthetic owner E.J. Johantgen.

Before you all get uppity on me, I actually think Johantgen has some good reasons for deciding to pull his artists from Spotify, certainly the most well-reasoned I’ve seen yet. That doesn’t mean I agree with his final decision, but they’re good reasons nonetheless and should be discussed. So:

1) Independent labels are getting the short end of the stick. Part of the final deal that allowed Spotify to finally come to the U.S. after years of negotiations involved all four major label groups getting a share of Spotify’s profit. I can’t remember where I read this, but I believe that the four companies have a combined 20-25% stake in Spotify’s U.S. profits. They also all received large sums of cash up front as part of the deal. While none of this is going to add up to very much in the long-run it’s certainly something, and the net result is that these labels are effectively getting better rates from Spotify than independent labels. How these better rates filter down from the label payouts to the bands themselves is unclear… I’d wager it’s likely that the bands still get the same payouts either way and that the labels will just keep the cash advances and profit sharing income to bolster their bottom line and pay operating costs. Even if this is the case, though, labels need income to keep going and I get that, and independents like Prosthetic are unfairly left out.

2) Spotify needs to be 100% transparent about their income sources and payouts. This is the big one, and I wholeheartedly agree. Until we know how much Spotify is making from ad income, how much they’re making from premium subscriptions (as opposed to free memberships) and the total of how much they’re paying out in royalties — in addition to their operating cost / overhead — it’s impossible for anyone to say whether their royalty rates are fair or not. If Spotify doesn’t have much money coming in, well, then their payout rates could in fact be quite fair; on the flip side, if they’re making bank on ads and pocketing the profit, not cool. I’ve said it before and I’ll say it again, because it’s very important: Spotify needs to be forthcoming with 100%, no-bullshit transparency. It needs to happen now. Or else it’ll be clear they’re hiding something.

Now, all of that said, I’ve obviously been a big supporter of Spotify in the past and that hasn’t changed. Ultimately I feel like E.J. is doing a disservice to his artists, and therefore his label, by pulling out. Sure, the payout rates may suck, but when you consider the most common alternative is going to Google, typing “animals as leaders rapidshare” and having the album for free in under a minute, you have to consider that sucky royalty rates from Spotify are better than nothing at all. This is where a lot of labels are missing the mark: not having your wares on Spotify isn’t going to drive potential customers to buy CDs or MP3s on iTunes, it’s going to drive them to piracy. That much is tangible and even measurable to some degree. What isn’t tangible or measurable at all is the promotional benefit of having potential fans discover new music via Spotify’s integrated sharing/playlisting/radio features or simply out of curiosity, becoming devoted fans, and purchasing CDs, vinyls, t-shirts, hoodies and concert tickets farther down the line. That right there is the real benefit of Spotify (and all streaming services), and Prosthetic’s artists will be missing out.

Which leads into the second reason I think this is a bad move: Prosthetic, more than any other metal label, is best equipped to withstand the new era in which sales of recorded music won’t be a significant income source. They print a good amount of their merch in-house, run their own webstore and warehouse and even have an in-house booking agent to handle their smaller bands. This is the model for success in the new era. On top of that, Prosthetic’s braintrust has a keen ear for talent and is one of the few labels left that does A&R right, takes chances on young, left-of-center bands and allows them to develop over time. If there’s any label that I’d think Spotify would be good for, it’s Prosthetic; they’ll be just fine in the digital/streaming age.

So, in conclusion: totally valid reasons for pulling out of Spotify, but I still disagree in the grand scheme. The biggest issue right now is getting full disclosure from Spotify on their business practices. Until that happens we can’t really say whether their payout rates are fair or aren’t, or whether any label’s decision to withdraw is good or bad. I sure hope that Spotify does well and increases their royalty rates, but any conjecture we make right now is just pure speculation.

Prediction: Metal Blade and Prosthetic will be back on Spotify within a year, probably sooner. Century Media is anyone’s guess.


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