May 24, 2012 at 11:48 am

Rdio Wants To Pay Artists for Turning Fans into Subscribers

rdio subscription

The music middlemen have another reason to be nervous.

Rdio, the music subscription service whose redesign we applauded at SXSW, plans to pay recording artists who drive fans to its subscription service. “They’re basically offering a bounty for everybody you bring them,” said an anonymous Rdio source, according to Billboard’s report. Another said they were thinking $10 per subscriber would be a good number.

This stands in stark contrast to what our pals at Spotify said they planned to do, back when I first met with them in early 2009. When I asked Spotify co-founder and CEO Daniel Ek whether he planned to go directly to artists for music, he said he preferred to work with labels and aggregators. That makes sense. It’s hard enough trying to change the world of music without negotiating a separate deal with every band on the planet.

Likewise, under this reported plan, which jibes with a conversation I recently had with an Rdio executive, Rdio would continue to pay artists through their label, publisher, or copyright aggregators like The Orchard. Those rates range from $0.005 to $0.01 in confidential documents seen by (we’re not breaking that news; others report the same, including Billboard in the above-linked report). That structure would not change under this reported plan.

But by turning artists into marketing machines for Rdio, these bounties would build an unprecedented connection between the millions-of-songs-strong subscription services and the artists upon whose music the industry depends. It’s not too hard to imagine bands just signing directly to one service or another on an exclusive or semi-exclusive basis, considering these bounties.

If a band has 10,000 loyal fans, and the only legal way those fans can get all of that music upon its release (as opposed to the smattering of songs bands would presumably still post to YouTube, send to music blogs, etc.), perhaps those fans would subscribe to Rdio on the recommendation of that band — especially if Rdio forms the back-end of their artist app. That adds up to a decent-sized check.

We’ve been bandying about a similar idea for artist apps that would run on Rdio or other music platforms, allowing artists to “own” the relationship with their fans through apps, allowing them to sell their own tickets alongside a real artist radio station. Rdio’s plan would dovetail nicely with that, in that artists would have a $10 incentive for using Rdio as the back-end for such apps (we won’t reiterate the idea here, but if you’re in a band or are curious about how they might make money in the future, this could be worth a read).

Suddenly, those 10,000 fans would potentially be worth $100,000 to that artist — and that’s before the fans even start listening to music, telling their friends about the plan, buying tickets within the same apps they use to listen, buying tickets for shows on app-connected televisions like whatever Apple is working on, and so on.

Let’s not get too far ahead of ourselves. For now, it’s interesting enough that Rdio wants to pay artists directly for encouraging their fans to subscribe. If its plan works, musicians themselves could provide some of the marketing muscle Rdio needs in its quest to catch up to Spotify — and that all subscription services need in order to convert listeners into believers.

  • edmanger

    C’man Spotify, you can do it!  These pretenders won’t last much longer, what with your Coke partnership and massive userbase and whatnot.  Surely? Please prove my case study right!

  • Hammy Havoc

    I’d go with Rdio over Spotify any day.