Original URL: http://www.theregister.co.uk/2012/01/27/spotify_conversions_and_holes/

Spotify reckons 1 in 5 freebie-gulper eventually pay up

Takes pop at labels for withholding

By Andrew Orlowski

Posted in Business, 27th January 2012 15:34 GMT

Spotify executive Ken Parks says Spotify has 3 million paying customers, and 20 per cent of people who get on to the free, ad-supported part of the service are signing up to become paying punters. Most of those, 15 per cent, sign up to the premium tier, Parks claimed. The premium tier gives you offline and mobile access to the music.

He also criticised acts who withhold their new releases from Spotify. Spotify pays only pays tiny royalties compared to sales, and acts including Adele, Coldplay and The Black Keys have withheld new material from the service. Given how rapidly album sales are collapsing, the impasse might not last long – but popular artists, like footballers, are still entitled to make the most of what is usually a very brief hour in the sun.

As this post explains, smaller successful acts with around (say) 50,000 core fans need to do both: maximise revenue from the fans with new material, and put it on streaming services later to grow that fan base. Universal Music Group's digital supremo Frances Keeling echoed the criticism, singling out independents.

But that needs tempering with a bit of reality.

Spotify's conversion rate is no doubt welcome and it was received with joy at Universal Music, which was hosting Parks last night. UMG is a key shareholder in the service. But let's not kid ourselves here how much reform needs to be done here. I've been looking for old material on Spotify, and very often, it's not there. This is surprising since the missing list includes very popular recordings from the 1970s by successful acts. Most of Van Morrison's purple patch is missing, and the disco giant Bohannon isn't there at all. (His best record isn't even available in digital format).

Major labels are constructed as hit factories, and they're better placed to weather the economics of streaming than independents. In addition, majors are not in a strong position to criticise independents for withholding, when they do such a shoddy job with their own digital supply chains. Paid Content has a few choice quotes, here. ®