Singer-songwriter Taylor Swift reignited the row over streaming songs online when she removed her albums from Spotify, citing too little reward for the creators. Stuart Dredge on a battle worth billions to the industry

The future of music sales is here. So how CAN the artists make it pay?

After more than a decade of declining sales, the music industry believes streaming services like Spotify offer a path to a return to growth in the future. But not every musician agrees and the row is growing louder.

From Thom Yorke labelling Spotify “the last desperate fart of a dying corpse” to Taylor Swift removing all her albums from the service, a series of prominent artists have now questioned the streaming model.

Swift’s removal has generated a new debate about streaming: whether free streams supported by advertising are as valuable as streams by people paying £9.99 a month for a “premium” subscription without advertising.

“The premium tier to me are real active record buyers, paying their $9.99 or €9.99 or £9.99 a month,” said Jonathan Dickins, who manages Adele, at this month’s Web Summit conference. “My feeling would be, to get around the situation with someone like Taylor Swift – but Spotify won’t do it – is a window between making something available on the premium service, earlier than it’s made available on the free service.”

Dickins said he believed “streaming’s the future, whether people like it or not”, but suggested that Spotify needed more scale to prove itself. “Spotify will work if they get enough payers,” he said.

This is why the Taylor Swift affair is a genuinely dangerous moment for Spotify, which is used to artists including Adele, Coldplay and Beyoncé “windowing” their new albums: keeping them off streaming services for a few months after release to maximise sales of CDs and downloads.

By removing her entire back catalogue, Swift has generated a new discussion about whether albums should also be windowed between the free and premium tiers of services like Spotify. Her music remains available on premium-only rivals like Rdio, Napster and Apple-owned Beats Music.

“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,” Swift told Yahoo in her first comments on the decision last week. “And I just don’t agree with perpetuating the perception that music has no value and should be free.”

Scott Borchetta, who runs Swift’s label Big Machine, later claimed that other managers and artists are supporting the stance. “There’s a big fist in the air about this. Spotify is a really good service, they just need to be a better partner.”

This is why the debate shifted last week from whether Swift is anti-streaming – she is not – to whether Spotify should be more flexible in response to concern from artists that it should be reserving some music for its paying customers only.

In its defence, the company’s chief executive, Daniel Ek, has argued that with 50 million active users, 12.5 million paying subscribers and $2bn of royalties paid out to labels and music publishers since 2008, Spotify’s policy of not restricting music from its free users is the most effective way to drive subscription sales.

“Here’s the key fact: more than 80% of our subscribers started as free users. If you take away only one thing, it should be this: no free, no paid, no $2bn,” he wrote in a blog post.

Spotify already has many more paying customers than all of its rivals combined: its 12.5 million subscribers compare with Deezer’s 5 million; Rhapsody and its European brand Napster’s combined 2 million; and the unknown totals for Rdio and US-only Beats Music.

But Ek’s claim that Spotify was on course to pay $6m a year for streams by “a top artist like Taylor Swift” sparked a new dispute with Borchetta, who proceeded to tell Time that Big Machine had been paid $496,044 in the previous year for US streams of Swift’s music on Spotify.

Cue Spotify responding that it had paid out $2m for global streams of her music in that period, and $500k in the month before her pulldown alone. The comparison of US to global figures meant both sides were right, but the sight of them arguing so publicly emphasised how their relationship had broken down.

That was compounded when Swift’s albums were made available through Spotify’s latest rival, Google’s YouTube Music Key, which launched last week – despite it having the same free and paid tiers, and a similar hardline policy on labels not being able to restrict music to the latter.

For now, Spotify is coming off worse in its dispute with Swift. Her latest album 1989 sold more than 1.2m copies in its first week in the US alone, while the dispute with Spotify has ramped up pressure on the company to rethink that no-free-restrictions policy.

This argument comes as Spotify tries to win over musicians who have complained that they do not earn enough money from streams. It’s fuelled by distrust of the fact that major labels own at least 18% of the company through equity stakes granted when it was negotiating its first licences in 2007 and 2008.

Some artists suspect that those labels are holding out for big windfalls if and when Spotify either goes public or gets bought, and fear that the proceeds – as well as the large advance payments Spotify makes to labels whenever it renegotiates its licensing deals – will not be shared fairly with musicians.

This is the simmering climate of distrust that forms the backdrop to any new dispute, like that involving Taylor Swift: a point made by U2’s frontman Bono when he appeared at the Web Summit conference.

“The real enemy is not between digital downloads or streaming. The real enemy, the real fight, is between opacity and transparency. The music business has historically involved itself in quite considerable deceit,” said Bono.

Ek addressed that theme in his blog post. “Lots of problems that have plagued the industry since its inception continue to exist. We’ve already paid more than $2bn in royalties to the music industry, and if that money is not flowing to the creative community in a timely and transparent way, that’s a big problem.”

Spotify has already gone further than rivals in publishing details of how it calculates the royalties it pays out to labels and publishers, while also providing artists with analytics showing how frequently their music is being streamed.

However, the terms of its licensing deals with labels and publishers, and how its advance payments are shared with artists, are where what Bono calls the “opacity” lies, not just for Spotify, but for YouTube, Apple and any technology company involved in digital music.

The battle is actually about more artists (and their managers) fighting for more transparency in general. Spotify is caught in the middle, with artists’ ability to withhold music one of their most potent weapons. Streaming is a huge part of the music industry’s future, but if that future is to be healthy, artists cannot be screwed, sidelined or – in the case of Taylor Swift – shaken off.

For and against

Spotify sceptics

“I think it’s really still up for debate whether this is actual progress, or whether this is taking the word music out of the music industry.”

Taylor Swift

“To me this isn’t the mainstream, this is is like the last fart, the last desperate fart of a dying corpse. What happens next is the important part.”

Thom Yorke of Radiohead

“Are they simply a legalised version of file-sharing sites such as Napster and Pirate Bay – with the difference being that with streaming services the big labels now get hefty advances?”

David Byrne of Talking Heads

Spotify supporters

“Spotify is paying out 70% of their revenue to musicians and rights holders. If I had to release Thriller today, you can be sure I’d want it on Spotify.”

Quincy Jones

“I’ve long felt that artists railing against Spotify is about as helpful to their cause as campaigning against the Sony Walkman would have been in the early 80s.”

Billy Bragg

“I played to a crowd that knew all the words to all the songs that had only just come out that week. And it’s because kids were just going on and Spotifying and listening and it really helps an album get out there.”

Ed Sheeran