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THE LEFSETZ LETTER: Spotify Transparency

There is none.

In Singapore, I interviewed Ken Parks, majordomo of Spotify's U.S. operation. I told him I would ask tough questions. That I had to, everybody already thinks I'm on the Spotify payroll, I just couldn't let him do a commercial. He said this was all cool.

And then didn't answer a single question I had, certainly not any that probed into the inner workings of the service. Not that I was interrogating him. But why exactly did you have to sign in with Facebook? Ken said everybody liked that, he got no complaints. He did admit that search was flawed. But I still can't understand why it works so well in iTunes and so poorly in Spotify. If I don't find something in Spotify, I change the search terms and suddenly whole albums appear. I'm not a techie, why does Apple do it so much better, is it really that hard, hell, Spotify's been around for years. And then I brought up the obvious point, the one I'm inundated with, the small payments.

Bob Lefsetz, Santa Monica-based industry legend, is the author of the e-mail newsletter, "The Lefsetz Letter". Famous for being beholden to no one, and speaking the truth, Lefsetz addresses the issues that are at the core of the music business: downloading, copy protection, pricing and the music itself.

His intense brilliance captivates readers from Steven Tyler to Rick Nielsen to Bryan Adams to Quincy Jones to music business honchos like Michael Rapino, Randy Phillips, Don Ienner, Cliff Burnstein, Irving Azoff and Tom Freston.

Never boring, always entertaining, Mr. Lefsetz's insights are fueled by his stint as an entertainment business attorney, majordomo of Sanctuary Music's American division and consultancies to major labels.

Bob has been a weekly contributor to CelebrityAccess and Encore since 2001, and we plan many more years of partnership with him. While we here at CelebrityAccess and Encore do not necessarily agree with all of Bob's opinions, we are proud to help share them with you.

Now let me say that artists are dumb. They're the most antiquated people I know. They want no change, no wonder their music sucks. They're too stupid to see that we're going to a mobile world and on mobile handsets… Spotify is not free. The price and ultimate revenues skyrocket. This is the future. A world where we all pay for this convenience. The fact that artists can't understand this is a good thing. Because finally, the technology is ahead of them, the legal technology.

But at the end of my "interview", Peter Jenner, original manager of Pink Floyd, thinker extraordinaire, stood and asked why there was no Spotify transparency, why artists could not see what they were getting paid.

Ken gave the usual response. That Spotify paid record companies and these entities accounted to artists, and if something got lost in translation, it was not Spotify's fault.

In other words, Spotify's on the wrong side.

Did you see the excerpt from Walter Mossberg's interview with Daniel Ek and Sean Parker at the D: All Things Digital Conference today?

Check it out:

You'll end up hating Sean Parker.

Sean starts to talk, and he's blaming Apple, everybody but himself. Spewing untruths, that the people you license music from today are different from who they were a decade ago. No, that's untrue. It's the same damn suspects. It's just that their revenues went down. They now wanted to make a deal.

But on their own terms.

Musicians are now doing it for themselves. Because they're sick of the major label duplicity, the lack of transparent accounting. No matter what your deal, they don't pay properly. They're crooks in Armani suits. Which is why superstars don't employ them and so many newbies don't either. At least explain to me how you're screwing me.

But the major labels won't.

And now Spotify won't either.

I get that they pay the lion's share of their revenues to rights holders. But exactly how much? And why does everybody get a different deal? Everybody knows Apple splits. Hell, write an app and you get seventy percent. Why is it different in music?

Spotify's on the wrong side.

Which is why artists are up in arms.

And the company can't explain itself because it's beholden to the labels/rights holders. Isn't that how we got into this mess? Fat cats on the wrong side refusing to enter the future?

It's one thing if I know I'm making a bad deal. That's my choice. Maybe I'll get screwed financially in exchange for fame, people will make that deal. But when you don't even tell me how you're screwing me, how much you're really gonna pay me, that's when I get mad, that's when we all get mad.

It'd be one thing if labels said we pay you ten cents on the dollar every month. Instead, they pay a percentage based on a formula that's open to interpretation and they're obligated to pay infrequently and don't even do that and you can't even get the records to see if they're right, it's like trying to defend yourself in court without being able to see the police report!

Spotify may be new technology, but its business techniques are positively old school. And that sucks.

Now Spotify's got a huge problem. Uptake sucks. Most kids haven't even tried the service, even though it's free. They're not getting the message out. And once again, artists are ignorant. Payments might be low from Spotify today, but the competition is not CDs and iTunes, but YouTube and P2P, where the artists don't get paid at all.

In theory, Spotify is brilliant.

But the devil is in the details.

We just don't trust the company.

Daniel Ek, yes. He's the techie, pursuing the mission of getting all the music to all the people as well as becoming rich. But as far as the rest of the spokespeople… They seem just like the label executives, short term players in it for personal enrichment.

Music only works if it's forever. If you gain royalties for decades.

Can't you at least tell me how much I'm going to be paid?

Laying all the blame on the labels is like saying you're beholden to your parents. Come on, have some balls. Tell us how much you're paying.