EXCLUSIVE: Spotify ‘Disappointed’ In Thom Yorke As Aus Indies See Major Label Bias

Spotify have admitted that they were “really disappointed” in Radiohead's Thom Yorke and Nigel Godrich's decision to attack the streaming service as the Australian indie sector made further allegations of a major-label bias in the sector.

Last week Yorke and collaborator Godrich traded verbal punches with the global music streaming company after claiming that it was stifling emerging artists and the financial royalty payments rigged towards major labels.

Nick O'Byrne, General Manager of the Australian Independent Record Labels Association [AIR], told theMusic.com.au that the issues weren't unique to Spotify and that independents face an uphill financial battle across all services.

“All label deals with streaming services are protected by confidentiality clauses so we'll never know exactly what major labels are getting paid in comparison to indies,” he said. “That said, you can be sure that the majors try to use their power to force considerably better terms than what indies get.

“It's not a secret that the major labels own 18 percent equity in Spotify. Merlin, which represents many of the world's most important indie labels, owns 1 percent of Spotify. Unfortunately this means that every single piece of revenue paid to a streaming service like Spotify as a result of independent content is indirectly adding value of the majors' equity.”

Charles Caldas, CEO of the global independent label rights agency Merlin, declined to comment for this article, but Spotify artist in residence DA Wallach – real name Chester French – denied to theMusic that there was a bias towards independent labels and artists.

“We treat every artist exactly the same,” he said, adding that the service was frustrated with Yorke and Godrich's very public slamming of the service. “It put doubt in peoples' minds.”

“We had heard about their concerns weeks ago and we tried to reach out but they didn't have an interest in talking to us,” French said. “I sympathise with their intention to support artists… [but] I think it would be much more productive to help explain how the service works, rather than distorting it… they neglected a lot of the evidence and had a disregard for the details.”

Spotify's counter argument to the Yorke claims have centred around the $500 million figure they've paid out to rights holders since it was founded five years ago. The Sweden-originating service estimates that it'll dish out another half a billion this year.

French also points to Spotify's Discover function, which allows users to purchase tickets and merchandise from a band via a partnership with Songkick, and are looking to open up their back-end data to artists in the future – an idea internet radio service Pandora have long been flirting with.

Another prominent streaming service, Rdio, recently announced the appointment of MTV Head Of Music And Talent Paola Cracknell as Head Of Music And Media Partnerships for Australia, and signalled an intention to attract exclusive content from artists – including independents – with the lure of marketing dollars to promote those exclusives.

“Our approach to working with the majors and the indie labels are equal and the same,” Cracknell told theMusic. “We hope to amplify the marketing opportunities for local artists by directly investing in advertising spend which we strategically plan out with the artist's label and management.”

Rdio has been working with independent company UNFD, who have distribution through Warner, and We Came As Romans' album Tracing Back was streamed exclusively through the service. Rdio have also partnered with Elefant Traks on Horrowshow's national tour and in the coming weeks will announce a national band competition.

“Not only will Rdio be a major sponsor, but we will be heavily involved in every aspect of the competition,” Cracknell said. “As part of this, Rdio will also provide marketing support and an international platform for the winner.”

But despite their arguments, O'Byrne attests that behind the confidentiality of the exact deals the majors have the upper hand.

“The majors know that no one can start a viable digital music platform without their content and as a result they use their considerable power to shape the digital landscape and influence the business practices of streaming services,” he said, “they don't even try to keep it a secret.

“I was even in the room earlier this year where a senior executive from Universal asked YouTube executives in all seriousness to start favouring their content over all others, I almost fell off my chair.”

He also citied Universal sources, who said that they will often take equity in a start-up company when they can't afford an advance.

“When a large company leverages its artists' content for an advance or equity, then the fair flow of royalties becomes very hard to trace and artists invariably miss out,” O'Byrne said.

French denies having ever felt pressure from major labels to favour their content.

Streaming services aren't going to make artists rich on royalty payments alone. The big question facing the industry at the moment is if streaming services are becoming a foundation part of the music landscape, how can it be best used to leverage other revenue streams?

Shortly after Yorke's news broke, Radiohead's manager Brian Message told BBC Newshour that he was at odds with the band's frontman and that he saw the technology development of services such as Spotify as a “good thing”.

“Streaming services are a very new way for artists to engage with their fans,” he said. “As the model gets bigger I think we'll find it'll become a place where all artists, managers and all creators can receive what they regard as equitable remuneration.”

“People have been trying to do this for ten years,” said Spotify's French of the streaming model. “[But] we've got various voices in the music industry to cooperate for the first time.”

He added, “The only way this is going to become a good profitable business is if we get millions more people using the service, so we're sort of all in this together. That's why we need artists, labels and the industry on board.

Spotify “could be profitable right now if we decided to stop growing,” he added. “It's a difficult business because we pay out 70 cents of every dollar we get.

“We invest so much of the money we make into growing the service… and there are more territories that we want to expand to.”

As previously reported, market analysis from Australia's Venture Consulting found that the music streaming model wasn't currently sustainable, and wouldn't be until the industry accepted that the model was a substantial platform for growing the industry. Then, it argued, the services could slash their royalty payments to rights holders to turn a profit.

Indeed, Yorke and Godrich aren't opposed to all forms of streaming. Over the weekend their band Atoms For Peace, whose albums were part of their material pulled from Spotify, announced they would be the partnering with new service Soundhalo. The start-up allows fans at a concert to purchase audio and video of songs shortly after they are performed.