Post by Johnkenn on Sept 4, 2013 9:39:55 GMT -6
www.theguardian.com/technology/blog/2013/sep/04/ministry-of-sound-spotify-lawsuit
Ministry of Sound: 'It is time that Spotify's actions are held to account'
Chief executive Lohan Presencer explains why his company has filed a copyright infringement lawsuit against the streaming music service
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Lohan Presencer
Ministry of Sound chief executive, Lohan Presencer.
When Apple launched iTunes in 2003 the major record companies missed a trick. They never imagined a computer firm would change the shape of the music business.
iTunes is now the largest music retailer in the world with 575 million customers and annual sales of $23bn. It is the main source of income for every record company on earth. Not only that, Apple built its hardware business on an iTunes foundation – iPods, iPads, iPhones. Not a penny of the sales of which were shared with record companies. The music industry swore never to make the same mistake again.
Fast forward to 2008 and the launch of Spotify. Hailed as the ultimate counter attack to online piracy, it offered unlimited on-demand music from all the major labels, some 18m tracks. It was free so long as you were prepared to put up with an advert after every few songs. There was an ad-free version for a small monthly fee (£10/$10 a month subscription).
How could Spotify sustain this model? Why were the majors prepared to license a service which so clearly devalued their product and would inevitably cannibalise the lucrative download market, albeit a market dominated by Apple?
Well, Spotify can't afford it. The three years of published accounts to the end of 2012 show cumulative losses of over $154m and a further increase in annual losses on the previous year.
Why are the majors prepared to support it? They've been 'incentivised' with equity and cash. The cash fills short-term holes and the equity is insurance against another Apple, just in case someone does decide there is a sustainable business there and buys out Spotify.
On its website, Spotify currently claims to have more than 24 million active users but admits nearly 80% are on the free service. How long can it continue to raise money against astronomical valuations (the last one being $4bn) when its model means it has little prospect of gaining critical mass or turning a profit?
In the meantime, Spotify is addicted to PR, its oxygen of growth. Favourable comparisons to Apple and positive reports of industry data showing exponential growth of streaming revenue are its lifeline. Yet what the believers fail to tell you is that published streaming figures include advertising revenue from YouTube, the great hidden free music streaming service.
There's also much discussion about Spotify saving the music industries of Sweden and Norway. What the commentators don't explain is that a substantial proportion of this 'growth in revenues from streaming' comes from deals with mobile phone and broadband operators. It doesn't necessarily mean that all their customers are actually using the service and that the deals will be long term and sustainable sources of income for the industry.
Let's put this in perspective. According to BPI annual figures, UK record company revenues in 2011 were £795m. Total paying UK Spotify customers at that point could be reasonably estimated to be no more than 250,000. At £10 a month that's total net income of £25m. About 55% of this is paid through to record companies, £13.75m - less than 2% of total industry income. Even by generously assuming paying users doubled in 2012, Spotify's contribution still only amounts to 3.5% of total industry income.
Radiohead frontman Thom Yorke and his producer Nigel Godrich recently created headlines when they accused Spotify of not supporting or paying new artists – something fiercely rejected by Spotify CEO Daniel Ek, who drew attention to the increasing amounts his company is paying labels.
But that's just the point. The money Spotify pays labels is not necessarily flowing through to artists. Also Spotify isn't paying all labels.
Ministry of Sound is a different type of record label. Like others, we sign and develop artists. We also have hit singles - including seven UK No 1 records in the past two years.
Unlike others, the largest part of our business comes from sales of compilation albums. We painstakingly create, compile and market our albums all over the world. We help music fans discover new genres, records and classic catalogues. Millions trust our brands, our taste and our selection. We give them great listening experiences at a good price.
But you won't find our compilation albums on Spotify. Why not? Because its business model does not recognise that our products have any material value. It doesn't consider them worth licensing. Which would be entirely its prerogative had our paths not crossed. But last year we noticed something on Spotify. Users of the service were copying our compilations. They were posting them as their own playlists and calling them "Ministry of Sound". We assumed it was an oversight on Spotify's part and contacted the company to request it remove the offending playlists. It declined, claiming there was no infringement and it wasn't its responsibility to police its users.
Several rounds of legal letters later, this dispute will now be settled in court. We believe we have a clear cut case. After 20 years and more than 50m album sales, the value and creativity in our compilations are self evident.
Until now, we've watched Spotify's progress from a distance. But we can no longer remain silent. This so-called saviour of the industry and enemy of the pirates is allowing our compilations to be used without permission and refusing to take action when told about the problem.
This is a David vs Goliath battle, but one which we have no choice in fighting. If we roll over and don't protect our rights, then we open the floodgates to others. We will not let that happen.
It is time that Spotify's actions are held to account.
Ministry of Sound: 'It is time that Spotify's actions are held to account'
Chief executive Lohan Presencer explains why his company has filed a copyright infringement lawsuit against the streaming music service
Share 74
inShare
8
Lohan Presencer
Ministry of Sound chief executive, Lohan Presencer.
When Apple launched iTunes in 2003 the major record companies missed a trick. They never imagined a computer firm would change the shape of the music business.
iTunes is now the largest music retailer in the world with 575 million customers and annual sales of $23bn. It is the main source of income for every record company on earth. Not only that, Apple built its hardware business on an iTunes foundation – iPods, iPads, iPhones. Not a penny of the sales of which were shared with record companies. The music industry swore never to make the same mistake again.
Fast forward to 2008 and the launch of Spotify. Hailed as the ultimate counter attack to online piracy, it offered unlimited on-demand music from all the major labels, some 18m tracks. It was free so long as you were prepared to put up with an advert after every few songs. There was an ad-free version for a small monthly fee (£10/$10 a month subscription).
How could Spotify sustain this model? Why were the majors prepared to license a service which so clearly devalued their product and would inevitably cannibalise the lucrative download market, albeit a market dominated by Apple?
Well, Spotify can't afford it. The three years of published accounts to the end of 2012 show cumulative losses of over $154m and a further increase in annual losses on the previous year.
Why are the majors prepared to support it? They've been 'incentivised' with equity and cash. The cash fills short-term holes and the equity is insurance against another Apple, just in case someone does decide there is a sustainable business there and buys out Spotify.
On its website, Spotify currently claims to have more than 24 million active users but admits nearly 80% are on the free service. How long can it continue to raise money against astronomical valuations (the last one being $4bn) when its model means it has little prospect of gaining critical mass or turning a profit?
In the meantime, Spotify is addicted to PR, its oxygen of growth. Favourable comparisons to Apple and positive reports of industry data showing exponential growth of streaming revenue are its lifeline. Yet what the believers fail to tell you is that published streaming figures include advertising revenue from YouTube, the great hidden free music streaming service.
There's also much discussion about Spotify saving the music industries of Sweden and Norway. What the commentators don't explain is that a substantial proportion of this 'growth in revenues from streaming' comes from deals with mobile phone and broadband operators. It doesn't necessarily mean that all their customers are actually using the service and that the deals will be long term and sustainable sources of income for the industry.
Let's put this in perspective. According to BPI annual figures, UK record company revenues in 2011 were £795m. Total paying UK Spotify customers at that point could be reasonably estimated to be no more than 250,000. At £10 a month that's total net income of £25m. About 55% of this is paid through to record companies, £13.75m - less than 2% of total industry income. Even by generously assuming paying users doubled in 2012, Spotify's contribution still only amounts to 3.5% of total industry income.
Radiohead frontman Thom Yorke and his producer Nigel Godrich recently created headlines when they accused Spotify of not supporting or paying new artists – something fiercely rejected by Spotify CEO Daniel Ek, who drew attention to the increasing amounts his company is paying labels.
But that's just the point. The money Spotify pays labels is not necessarily flowing through to artists. Also Spotify isn't paying all labels.
Ministry of Sound is a different type of record label. Like others, we sign and develop artists. We also have hit singles - including seven UK No 1 records in the past two years.
Unlike others, the largest part of our business comes from sales of compilation albums. We painstakingly create, compile and market our albums all over the world. We help music fans discover new genres, records and classic catalogues. Millions trust our brands, our taste and our selection. We give them great listening experiences at a good price.
But you won't find our compilation albums on Spotify. Why not? Because its business model does not recognise that our products have any material value. It doesn't consider them worth licensing. Which would be entirely its prerogative had our paths not crossed. But last year we noticed something on Spotify. Users of the service were copying our compilations. They were posting them as their own playlists and calling them "Ministry of Sound". We assumed it was an oversight on Spotify's part and contacted the company to request it remove the offending playlists. It declined, claiming there was no infringement and it wasn't its responsibility to police its users.
Several rounds of legal letters later, this dispute will now be settled in court. We believe we have a clear cut case. After 20 years and more than 50m album sales, the value and creativity in our compilations are self evident.
Until now, we've watched Spotify's progress from a distance. But we can no longer remain silent. This so-called saviour of the industry and enemy of the pirates is allowing our compilations to be used without permission and refusing to take action when told about the problem.
This is a David vs Goliath battle, but one which we have no choice in fighting. If we roll over and don't protect our rights, then we open the floodgates to others. We will not let that happen.
It is time that Spotify's actions are held to account.
