Taylor Swift's Red may soon be the year's biggest-selling album, but it isn't on Spotify, Rhapsody, Rdio or any of the other music-streaming services – and that's not surprising. Late last year, Scott Borchetta, founder of Swift's label Big Machine Records, suggested he'd approach Spotify like Netflix, airing movies weeks after they come out. "We're not putting the brand-new releases on Spotify," he told Rolling Stone at the time. "Why shouldn't we learn from the movie business? They have theatrical releases, cable releases. There are certain tiers. If we just throw out everything we have, we're done."
Offering a streaming version of Swift's album for free via Spotify or Xbox Music, Borchetta argued, would cannibalize sales. However, Sachin Doshi, Spotify's head of development and analysis, points to Mumford & Sons' Babel as an example of the contrary: the album streamed eight million times in its first week, then sold 600,000 copies. "That goes to prove streaming services do not take away from unit sales and, in fact, can be additive for major artist releases," he tells Rolling Stone. "That's our point and we're sticking to it."
Just as top artists such as the Beatles once held out from iTunes, Spotify, the free streaming service that launched in July 2011 in the United States, has to figure out how to grow without Led Zeppelin, the Beatles, Metallica and AC/DC. In addition to Swift, the Black Keys and Adele are among the stars who've withheld new albums until weeks after their release dates. Other holdouts, including Bob Dylan, the Red Hot Chili Peppers and Arcade Fire, caved in recent months after meetings with Spotify reps. "It wasn't a negotiation, it was more of a 'guys, here's what's happening,' and really showing them Spotify is beneficial," Doshi says. "They start to get it once they see the numbers."
Spotify, which has 15 million users worldwide and four million paid subscribers, is part of a wave of services that have threatened to transform the record industry's business model from selling individual albums to streaming songs on demand. YouTube is by far the biggest such streaming service, although it makes money purely from advertising, not subscriptions – and most music, including Swift's Red, is available there for free.
Record executives aren't worried about the holes in the catalogs of Spotify, Rhapsody, Rdio or the others. "For years iTunes didn't have Madonna or Dave Matthews or the Beatles and did fine," says Alex Luke, executive vice president of A&R for the Capitol Label Group. "I would argue that the [streaming] space is still finding itself and the jury's still out on how big these services are going to get and whether or not a missing artist or a missing catalog will make a huge amount of difference. It didn't in the case of iTunes."
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