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How bad is it for Spotify that Taylor Swift pulled all her songs?

By David Holmes , written on November 3, 2014

From The News Desk

Taylor Swift's opinion of Spotify is no secret. Earlier this year, she wrote in the Wall Street Journal, "It’s my opinion that music should not be free, and my prediction is that individual artists and their labels will someday decide what an album’s price point is." Furthermore, her latest album, "1989" was kept off streaming services entirely, and it took months for her 2012 hit album "Red" to emerge on Spotify and the rest.

At first, it seemed like "1989" would follow in "Red"'s footsteps -- barred from streaming services but only temporarily, allowing for a hearty period of digital download sales. This practice, known as "windowing," has been around since the days of movie rentals, when film studios would delay VHS releases in order to make big bucks off theater ticket sales.

But now it appears that "1989" will never make it to Spotify. Like, ever.

As of this morning, Taylor Swift's entire discography has been removed from the streaming service. No "Fearless," no "Speak Now," nothing except for a track off the "Hunger Games" soundtrack.

So how big a problem is this for Spotify?

Plenty of artists have spoken out against the fractions-of-pennies Spotify pays in royalties per play. But only a handful, like Radiohead's Thom Yorke and the Chicago label Drag City, have removed their entire catalogs from the service. With digital download sales in a free-fall, boycotting Spotify is a risky move, particularly when listeners can simply hit up YouTube and listen to virtually any Taylor Swift song for free. But Swift is one of the few artists who still drives massive sales, not just streams. Her latest album is on track to sell 1.3 million copies in only its first week. That hasn't happened since 2002 when Eminem's "The Eminem Show" sold roughly the same amount.

Swift is also a unique case in that she has only a tangential affiliation with major labels, and thus has more control over where her music is available. Although Universal handles her distribution, she releases albums through her own independent record label, Big Machine. By contrast, Thom Yorke may be able to keep his solo albums off Spotify, but Radiohead's catalog is owned by Capitol which is part of Universal. That's why you have no problem finding "OK Computer" on streaming services.

Swift's exodus is definitely a setback for Spotify -- How can a company claim to offer the best music service in the world if it doesn't include what will almost certainly be the year's best-selling album? That said, the value proposition of Spotify for users is still astounding, offering millions of songs for free or for an affordable subscription fee. Spotify doesn't have the Beatles either, but that hasn't stopped the service from attracting 40 million users and counting. For Spotify's part, it's written a cute response to Swift, paraphrasing her 2008 hit "Love Story":

Taylor, we were both young when we first saw you, but now there’s more than 40 million of us who want you to stay, stay, stay. It’s a love story, baby, just say, Yes.
Interestingly, Swift's catalog ("1989" excluded) is still available on Rdio. This could be an oversight or it could be a conscious decision to bring attention toward Spotify, considering it's the biggest and, therefore in the minds of many artists, the most unfair of all the streaming services. If it's the latter, then Spotify may have more to worry about than it seems.

(UPDATE: According to Oyster's Kevin Nguyen, Swift pulled her songs from Rdio last week before re-adding them today, suggesting that her decision to stick with Rdio was a conscious one).

Not that Spotify should be too worried about the much smaller Rdio, per se. But what about Apple and its soon-to-relaunched streaming service? Not only does the company have a huge amount of influence in the music industry, it can also offer exclusive (and very lucrative) exclusive digital download promotions, like it did with Beyonce's last album. Huge artists like Swift could conceivably enter into an agreement with Apple to sell a new record on iTunes for its first week, before windowing it onto Apple's streaming music exclusively. And with exclusive rights to the industry's biggest names, Apple could annihilate Spotify and the rest with little effort.

Of course, that's a whole lot of conjecture. And, again, those deals would likely only be possible with artists like Swift who retain a large amount of control over how their music is distributed. But with little to differentiate Spotify, Rdio, and Beats Music in terms of functionality, a seemingly small advantage could win the whole game.

[photo by Eva Rinaldi]