Spotify: Staggering music releases (like movies) won't work

Hollywood studios have made billions by strictly controlling distribution. Some music acts think it may be profitable to restrict access to their work in a similar way.

Spotify CEO Daniel Ek during one of the company's press events last fall. Sarah Tew/CNET

The big film studios have made a pile of money by controlling where their movies are distributed and for how long.

A similar strategy has begun to attract supporters among big-name music acts. The idea is to debut music at Apple and Amazon and force subscription services such as Spotify and Rhapsody to the back of the line. According to the acts that have complained about subscription services, they are less profitable and also allegedly cannibalize iTunes sales.

Already, some acts, including Coldplay, have debuted tracks at iTunes and then later distributed them through subscription sites.

Critics say this will force streaming services and their growing audience into a digital-music ghetto, where they're barred from accessing the latest tracks. Spotify and Rhapsody execs argue that the plan will backfire and send fans back to the pirate sites.

Fast Company has a good interview with Kenneth Parks, Spotify's chief content officer, who said: "It's ridiculous to think that an 18-year-old kid who is denied access to listening on Spotify is going to run to iTunes and buy it. That's not the way it works. They're going to go to the torrent sites."

Isn't it amazing that after more than a decade, the music sector is still looking for a format to replace the CD? Nothing has generated the same kind of beaucoup bucks. A lot of people say the answer is in offering a combination of formats: downloads, streaming, and maybe ad-supported music, from services such as YouTube.

Not everyone is so sure.

Critics of subscription services include Dan Auerbach, singer/guitarist for the band The Black Keys. He told Billboard that "you get paid [for streaming], but it's so miniscule it's laughable." He added that "if you are a bigger band that's already known and you rely on record sales for a living, then it's really no place to be."

The execs from the subscription services say that their segment is barely in its infancy and will pay out much more as it grows.

One of the first things that needs to be done is to figure out how profitable would a Hollywood-esque distribution system be for music artists?

This is the way it works in film: Since the 1980s, a movie typically debuts in theaters and stays there for about four months. Then it's made available on DVD and later distributed for set periods, known as windows, on pay TV, basic cable stations, broadcast TV, and finally online.

There's no question that having multiple bites at the apple was extremely profitable for the studios. Home-entertainment revenue eventually dwarfed even box-office sales. Release windows also gave consumers choice on the kind of viewing experience they wanted and the price they were willing to pay.

But the music guys should note that the studios don't seem as enthusiastic about release windows, not since DVD sales began to plummet. Some in Hollywood want to collapse the windows, even theatrical windows.

Kenneth Parks, Spotify's chief content officer Spotify

For a while, some at the six major Hollywood studios were excited about premium video-on-demand. PVOD would offer early release movies, maybe even some still in theaters, for home delivery. Buyers would be able to access these flicks for about $30.

So far, PVOD hasn't gone anywhere. Still, there's plenty of talk in Hollywood now that windows must go.

Rick Cotton, general counsel for NBC Universal, was asked earlier this month during a panel discussion whether he believed "theatrical release ultimately goes away."

"Do you want the complicated answer?" Cotton said smiling. "Yes."

But the attorney later acknowledged he doesn't know what system may replace it or when. He also noted that film studios and TV networks may need to replace it with something very similar.

That's hardly a ringing endorsement of release windows. Spotify and Rhapsody seem to understand that they have to be patient. It's always been tough for legacy industries to let go of their business models.

"I want to be very clear," Parks told Fast Company. "We are not at all demonizing people who have a different point of view. We think that most of the world has been living in a different paradigm for the entire history of recorded music. They're used to unit sales. It's very difficult for some not only to get their mind around a new format but a new business model. It would be silly to think that entrenched behavior and habits--that have developed over a century--are going to change overnight."

That may be but I think the music and film sectors must answer this question for themselves: how can you try to enforce rules on distribution when you've lost control of that distribution?

 

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