When I started making records, the model of economic exchange was exceedingly simple: make something, price it for more than it costs to manufacture, and sell it if you can. It was industrial capitalism, on a 7’ scale. The model now seems closer to financial speculation. Pandora and Spotify are not selling goods; they are selling access, a piece of the action. Sign on, and we’ll all benefit. (I’m struck by the way that even crowd-sourcing mimics this ‘investment’ model of contemporary capitalism: You buy in to what doesn’t yet exist.)
But here’s the rub: Pandora and Spotify are not earning any income from their services, either. In the first quarter of 2012, Pandora— the same company that paid Galaxie 500 a total of $1.21 for their use of ‘Tugboat’— reported a net loss of more than $20 million dollars. As for Spotify, their latest annual report revealed a loss in 2011 of $56 million.
Leaving aside why these companies are bothering to chisel 10,000ths of a cent from already ridiculously low ‘royalties,’ or paying lobbyists to work a bill through Congress that would lower those rates even further— let’s instead ask a question they themselves might consider relevant: Why are they in business at all?
The answer is capital, which is what Pandora and Spotify have and what they generate. These aren’t record companies— they don’t make records, or anything else; apparently not even income. They exist to attract speculative capital. And for those who have a claim to ownership of that capital, they are earning millions— in 2012, Pandora’s executives sold $63 million of personal stock in the company. Or as Spotify’s CEO Daniel Ek has put it, ‘The question of when we’ll be profitable actually feels irrelevant. Our focus is all on growth. That is priority one, two, three, four and five.’
Growth of the music business? I think not. Daniel Ek means growth of his company, i.e., its capitalization. Which is the closest I can come to understanding the fundamental change I’ve witnessed in the music industry, from my first LP in 1988 to the one I am working on now. In between, the sale of recorded music has become irrelevant to the dominant business models I have to contend with as a working musician. Indeed, music itself seems to be irrelevant to these businesses— it is just another form of information, the same as any other that might entice us to click a link or a buy button on a stock exchange.