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You can hear tracks from "1989," including the smash hit "Shake It Off," on radio stations and across many online platforms, but Spotify isn't one of them. Swift's camp decided to pull the album from the on-demand service, fearing that it will eat into sales.
The move appears to be paying off, and without the ability to legally stream Swift's album through Spotify, it may be making the purchase more compelling.
Swift Justice
"Everything new, like Spotify, all feels to me a bit like a grand experiment," Swift said in a Yahoo Music interview earlier this month. "I'm not willing to contribute my life's work to an experiment that I don't feel fairly compensates the writers, producers, artists, and creators of this music."
Knocking Spotify, while keeping her music on Pandora (P) and Apple's (AAPL) iTunes Radio, requires an explanation for those not familiar with the different platforms. Pandora and iTunes Radio work a lot like traditional radio. Listeners can suggest a track or artist -- like Swift or "Shake It Off" -- but then the songs that stream are merely similar to the input.
Spotify, on the other hand, lets listeners pick exactly the tracks or entire albums that they want to hear. Users can set up playlists, and even save them to stream offline.
Pandora and Spotify are popular. There are 76.5 million active listeners on Pandora. Only a few million -- just 2.5 million as of early last year -- are paying subscribers. The vast majority of those accounts enjoy Pandora for free, putting up with ad breaks and limited ability to skip songs. Spotify had just 40 million active users worldwide earlier this year, but it also had 10 million of them paying for premium commercial-free access.
Spotify Fights Back
Swift argues -- and perhaps rightfully so -- that keeping music off sites like Spotify that give potential buyers a reason not to purchase the music outright is the right strategy. Given the success of her latest album, it's hard to argue against her.
"There are many [many] people who predict the downfall of music sales and the irrelevancy of the album as an economic entity," she wrote in a Wall Street Journal op-ed this summer. "I am not one of them."
"Piracy, file sharing and streaming have shrunk the numbers of paid album sales drastically, and every artist has handled this blow differently," she continued.
Spotify counters that it would have paid Swift well if her album had taken off on its platform. It has paid more than $2 billion to labels, publishers, and collecting societies for distribution to songwriters and recording artists.
The $6 Million Woman
"Payouts for a top artist like Taylor Swift (before she pulled her catalog) are on track to exceed $6 million a year, and that's only growing," Spotify wrote in its official blog last week. "We expect that number to double again in a year."
Spotify also has a point. Unlike outlets that don't pay artists, Spotify is compensating artists for lost sales. It's not just about exposure. If a top artist will make $12 million a year on Spotify, that's not chump change.
Spotify had better make sure that it makes this point loud and clear. If more artists follow Swift's example, it may dissuade listeners from taking to on-demand music streaming sites. It can't "shake it off" at this point. Digital streaming sites were once disruptive, but they need to be careful if they don't want to be the disrupted.
Motley Fool contributor Rick Munarriz is no Taylor Swift. His band Paris By Air makes mere pocket change on Spotify, but he's not going to pull his catalog from the site. It's all about reaching a global audience, a goal far different than Swift's aspirations. He has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Pandora Media. Try any of our Foolish newsletter services free for 30 days.
