Recently, I was jamming heavily to some Maroon 5 in my room with my friends using the online streaming program Spotify. The mood was awesome—great times, even better people, awesome music, and wonderful conversation. But then the music stopped. We all heard the jingle we hate the most: “O, O, O, O-Reilly…Auto Parts!” The room went silent. I awkwardly remarked: “That killed the mood.” I then considered, as I do almost daily, whether I wanted to sign up for a $5 a month student subscription to Spotify. Or maybe I could just buy my songs on iTunes and support the artist? Or, would I go against everything I stood for as an aspiring musician and businessman and go back to illegally torrenting my songs? Artists are rich anyway—do they really need my money when most of their revenues are made on touring? In this essay, I will argue that Spotify, the semi-free streaming application, is an ethical company that reaps benefits for all major players in the music industry. I will use a utilitarian analysis to demonstrate Spotify’s ideal appropriation of benefits and reduction of suffering against other forms of music consumption, and as it pertains to the future of the music business.
Relevant Trends in Music
With the rise in popularity of the iPod and iTunes in the early 2000s, Apple singlehandedly flipped the music industry upside down. Music distribution moved from physical CD and tape sales to digital downloads. The compatibility of the iPod/iTunes system popularized the use of mp3 players, combined with an online store harnessing a healthy combination of new and old music. In a similar channel, emerging companies like Pandora and Grooveshark provided online radio services with limited commercial interruption. It seemed that every previous distribution channel of music had shifted towards the digital realm.
In tandem with these new online services, illegal downloading also became prevalent. As music became converted into common file formats, Torrenting and Fileshare companies made it possible to trade music files by simply posting a zip file of an album to a restricted online server, which then could be easily downloaded by the user. Although the government and record labels eventually cracked down on this method, it still exists today and currently hurts album sales. More generally, the ability to copy music files digitally presents all sorts of issues for record companies trying to charge users for songs.
Album sales have decreased as well. “U.S. album sales totaled 4.68 million the lowest weekly total since the inception of Nielsen SoundScan in May 1991 (Christman).” This is primarily due to iTunes’ pay-per-song format and the rise of digital distribution channels. There also is an increased emphasis on touring and concert promotion. Companies like LiveNation now act as a middleman between labels and venues, controlling all the booking and covering all the costs for pop performers through megadeals. As a result, artists make most of their revenues on touring, using their record sales to promote their tour sales (the opposite cause/effect was true before this decade). This digression provides context on the decreasing leverage of record labels and a cause for the hypercritical and seemingly penny pushing actions that labels and artists are smiting on companies like Spotify and iTunes to drive revenue. Put simply, record labels are making significantly less money than they used to, with exponentially less influence over the promotion and brand strength of the artist. Most of the revenues in the music business are made from touring companies like AEG and LiveNation. The labels need all the help they can get in order to create value from their albums.
Spotify was born as a response to the trends in the music industry: increased dependence on online and electronic file formats for song purchasing, additional emphasis and leverage for artists to tour, and transition to online radio. I will first explain Spotify’s history and business model as a response to these trends. Then, I will consider how, according to principles of utilitarianism, why these attitudes present Spotify as an ethical or unethical company.
Spotify was launched in 2008 and immediately secured massive deals with major record labels, opening with a sizeable streaming catalog for listeners. Additionally, the concept of paid subscriptions was an innate characteristic of the app—paid subscribers had access to tons more music and no commercial interruption. Currently Spotify has over “10 Million Paid Subscribers and 40 Million Active Users (Katz).” Spotify is essentially a hybrid of Internet radio streaming and digital music marketplaces like iTunes. Users are able to browse and listen to different online playlists, search artists and songs, as well as create their own playlists by essentially “downloading” songs onto his/her computer. I surround the world “downloading” with quotation marks because the songs can’t be shared or burned onto a CD– they simply are able to be played offline through the Spotify app.
Additionally, Spotify includes tabs that urge users to check out concert appearances by the bands they are searching, as well as suggesting other similar artists. Spotify has recently incorporated a mobile app which harnesses all the same capabilities. Perhaps most importantly, social networking is a major part of the site, as the user can share songs with other users, send messages, follow artists, share playlists, etc. Spotify is essentially Facebook for music (the user’s Spotify account is inextricably linked to the Facebook account), which is an enticing feature previously used by music sharing companies like Napster.
Spotify capitalizes on the growing trends in social networking and digital music, while evoking feasibility. Spotify encourages users to browse new artists and songs and links them to concert appearances in their area. Spotify also keeps all their catalogs digital and exclusive to the application. I will use Utilitarianism to discern the effects of Spotify’s existence, analyzing specific aspects and features of Spotify’s business model.
Why use Utilitarianism to discern the ethics of Spotify as a company? A Utilitarian analysis denotes that “Of all the things a person might do at any given moment, the morally right action is the one with the best overall consequences (Haines).” That is—the best decisions of a company or person are those that cause the least amount of suffering and benefit the most entities. The music industry is extremely complicated, with several large organizations backing every decision for an artist. A Harvard Case Study on Lady Gaga’s cancellation and rebirth of her first arena tour lists five major stakeholders surrounding Lady Gaga’s brand: the record label, Streamline Records; LiveNation; her agent; Troy Carter, her manager; and the venues themselves (Elberse, Christiansen). All these entities have different opinions for the content and implementation of the tour (or potential cancellation of it), and these opinions certainly conflict. I am simply insinuating that in the music business, there are always multiple entities that value something different. The decisions that are made are going to hurt some organization or career, so in calculating the ethos of a company, a Utilitarian analysis is not only the most relatable, but also the most closely identifiable, knowing that there are several opposing stakeholders affected by every decision.
Critics of Spotify note that artists make significantly less per stream than they do per download, however the effects of this situation are small: “Record sales income was only one of a number of revenue streams for artists, and in the early years of their career it wouldn’t be a key income either (Dredge).” Looking at it consequentially, because an artist’s portfolio of revenues is so diversified, he/she is not hurt by bargain deals by Spotify. The artist may be even happier knowing his music is available for all the fans. Most of the artists’ revenues are made on touring anyway—Spotify promotes concerts for the artists in their application, so really the only one that is hurt is the record label. Independent artists not signed with a label will lean towards touring to promote their music, understanding that touring generates a higher amount of revenue.
Additionally, well-established bands such as Radiohead do not need Spotify to sell albums: “Thom Yorke, frontman of Radiohead, has said that he doesn’t need Spotify as a gateway for his music — people will want to listen to it anyway. (Pietruszewski)” I believe there is a threshold of band popularity—as soon as the band exceeds a certain popularity, Spotify no longer can affect them because the artist can generate positive revenues through the other distribution channels of their choice, whether it is touring, free YouTube streaming, physical album sales, or digital downloads. The negative consequences for Spotify are significantly less than one may think.
A popular argument for the logic of consequentialism is that results remain. “Actions are transient things, soon gone forever. Hence, one might think, in the long run only the results remain (Haines).” We can look simply at the music industry as a whole while Spotify is still prevalent. From 2011 – 2013, music industry revenues stayed flat at $7 Billion. The Recording Industry Association of America noted that streaming sites such as Spotify account for 21% of their revenues, noting the changing trends of the industry: “All of this shows the music industry today has grown into a diverse digital business teeming with a wide variety of innovative services catering to all types of music fans (Lewis),” Thinking big picture, if sites like Spotify account for 21% of the Revenues, and there existed no negative effect on the industry as a whole, it is difficult to make an argument against Spotify’s detriment to the industry.
But what about Spotify’s decision to disregard popularity and brand equity when drawing revenue from streaming– “And that places a perception of value on what I’ve created. On Spotify, they don’t have any settings, or any kind of qualifications for who gets what music (Engel).” An independent band with ten followers makes the same amount of money per stream than Coldplay. However, the band must agree to the contract with Spotify, and in a Utilitarian sense the band may lose some profitability, but it simply presents a more feasible way to listen to music, benefitting the listener and the record company. Securing more deals yields more revenue, and the record company is usually the one pushing for the deal anyway. The artist also may benefit from users listening to their material more, who will therefore be more driven to go to concerts, which creates most of the revenue for the artist.
Macklemore and Ryan Lewis are independent artists who refused to put their album on Spotify.
Perhaps most significantly, new data shows reduction of piracy due to increase in interest from Spotify. A Report by the NPD group shows that the number of music files being illegally downloaded was 26% less in 2012 than in 2011 (Knapp).” The feasibility of Spotify attracts would-be lawbreakers and we could see similar trends in the United States. If I want my favorite album and I can just play it from my computer whenever I want without paying, I’m not going to go out of my way to steal it. By reducing piracy, Spotify benefits concert promoters, labels, and artists, while curbing the enthusiasm of potential hackers. This is perhaps Spotify’s greatest benefit to the music industry.
True Value of Music
It can be concluded that Spotify is good for the industry as a whole. But I intend to look beyond Spotify and address its convenience. Spotify bestows convenience to our lives by letting us listen to the songs we want whenever we want. However, this comes with a caveat, as the beauty of music may be in our yearning for the perfect song. I fondly recall, as a teen, waiting up until 9:45 PM on school nights to listen to Eminem’s Lose Yourself on Z100’s top 9 at 9—the satisfaction of the song was far greater than when I downloaded it on my iPod years later. Yes, convenience monetarily benefits the industry as a whole, but does it ruin the thrill of listening to an awesome song? Also, Spotify allows the user to capitalize on our moods, understanding that the power of music is in its ability accentuates your emotions and tailor your feelings. Spotify’s true purpose is not just to benefit all parties involved in the music industry, but perhaps more simply to bring joy to the listener. Beyond all the financials and demands of the industry, Spotify must continue to question if they are overlooking the true purpose of music to the world, and if they are doing so are they simply ethical from a monetary standpoint.
Christman, Ed. “U.S. Album Sales Hit Historic Lows.” Billboard. Billboardbiz, 2 Aug. 2013. Web. 20 Nov. 2014.
Dredge, Stuart. “Spotify vs Musicians: 10 Things to Read to Better Understand the Debate.” The Guardian. N.p., 29 July 2013. Web. 20 Nov. 2014.
Engel, Pamela. “Taylor Swift Explains Why She Left Spotify.” Business Insider. Business Insider, Inc., 13 Nov. 2014. Web. 18 Nov. 2014.
Frere-Jones, Sasha. “If You Care About Music, Should You Ditch Spotify? – The New Yorker.” The New Yorker. N.p., 19 July 2013. Web. 20 Nov. 2014.
Katz, Candice. “10 Million Subscribers!” Spotify Blog. N.p., 21 May 2014. Web. 20 Nov. 2014.
Pietruszewski, Martha. “Live and Let Stream: Spotify’s Importance.” Minnesota Daily. U of M, 6 Nov. 2014. Web. 20 Nov. 2014.
Thompson, Stephen. “The Good Listener: Does Using Spotify Make You A Bad Person?” NPR. NPR, 26 Sept. 2013. Web. 20 Nov. 2014.
Knapp, Alex. “Study Finds That Streaming And Spyware Are Killing Music Piracy.” Forbes. Forbes Magazine, 26 Feb. 2013. Web. 21 Nov. 2014.
Lewis, Randy. “Music Industry Revenue in 2013 Stayed Flat at $7 Billion, RIAA Says.” Los Angeles Times. Los Angeles Times, 18 Mar. 2013. Web. 23 Nov. 2014.
Elberse, Anita, and Michael Christensen. “Lady Gaga.” Harvard Business School 016th ser. 9.512 (2011): n. pag. Web.
Haines, William. “Consequentialism.” William Haines, The University of Hong Kong, n.d. Web. 23 Nov. 2014