If anyone has a serious beef with the music labels, it’s Michael Robertson. Robertson took MP3.com public in 1999, only to later to pay tens of millions of dollars to labels that sued the startup, claiming storing songs on servers infringed their copyrights. Fast forward to today: A new wave of music startups like Spotify, MOG and Rdio stream songs from servers with the labels’ blessings. It might all be above board now, but the labels are still bleeding the digital-music services dry.
That was Robertson’s claim in an detailed and elegant jeremiad against the big labels. He claims that Spotify and its peers will never make a profit because of secret, onerous terms that act as a financial straightjacket for the startups, snoop on their users’ data and border on collision. Others were quick to suggest that it’s the music-streaming services that are being stingy. After all, by some calculations, an artist could have a song streamed 4 million times on Spotify and make just $1,200
So who is right? Both. And that’s bad for everyone. Music labels, being greedy music labels, want a profit. Desperate for a piece of a music-streaming market that isn’t going away, they are asking for everything they can in the name of rewarding artists (and investors). But the digital music services like Spotify need a low subscription fee – usually $10 to $15 a month for an all-you-can-eat plan – to build a critical mass of subscribers.
Ten bucks a month for streaming music looks a bit steep if you compare it to Netflix’s $8 monthly fee for streaming video. Or it’s a great deal, if you compare it to, say, the $65 or more that longtime Comcast subscribers pay for cable. But that’s just the problem. Comcast is expensive because it’s cable, and Netflix is cheap because it’s the Internet. We say information wants to be free online, but what we really mean is we want it cheap.
So when we ask who is to blame for the dismal economics of digital music, we shouldn’t point to piracy. That’s a scapegoat that nobody but the labels takes seriously anymore. The true culprit lies elsewhere. It’s just the Internet doing what it does – breaking down the walls and removing the friction that for decades made it such a slog to find and discover new things to hear, to watch, to read.