Business Matters: Why Taylor Swift’s ‘Red’ is Absent From Subscription Services

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(from Billboard.biz, October 23, 2012) Taylor Swift’s new album Red is currently absent from Spotify, Rhapsody, Rdio, Mog, and Xbox Music. The album is not likely to be available for subscription until Swift releases her next album. The focus for Red is a broad range of retail campaigns and promotions at both well-known CD sellers and non-traditional retailers.

Founder of Big Machine Records, Scott Borchetta, has struggled with the subscription model. “I personally struggle with that model- I don’t think that it should be free. If you’re a big battleship like Sony or Universal and have tens of thousands of masters, that income stream makes sense at big corporation. It doesn’t make sense to a small record company,” Borchetta told Billboard.biz at the iHeartRadio Music Festival.

A subscription service is a place to discover music and listen before purchasing the album, or maybe even a concert ticket. The subscription makes more sense for an unknown artist. An artist like Taylor Swift has a huge amount of awareness for her releases. Of course, the service can be used as a substitute for purchasing music. If steaming were included in the product mix, Red would generate $120,000 in royalties at 0.5 cents per stream. If Spotify were substitutive rather than additive, Big Machine would lose 11,436 digital album sales.

Red is nearly impossible to miss in the market place. The album is selling for $14.99 and has been the #1 album since iTunes dropped it early Monday. The album sold 262,000 units on Monday alone, which is more than most albums sell at retailers during the entire week. Target is selling a deluxe version and giving it a promotional push via a TV campaign. More than 1,600 24-hour Walgreen’s stores put the album on sale at midnight on Sunday. Unexpectedly, pizza chain Papa John’s is selling the Red album. Customers can buy the album at Papa John’s locations or they can have it delivered with their order. The ordinarily cardboard pizza boxes have been transformed into a special design featuring the album cover.