THE NEWS WRAP: Spotify founder points to $2 billion payout to counter charges it exploits artists

Spotify has paid more than $2 billion to the music industry to date, chief executive officer and founder Daniel Ek says.

The criticism that Spotify is making money on the backs of artists is upsetting, Ek says, because the startup was founded as the team loved music and thought piracy is killing it.

In the last year Spotify has paid $1 billion to artists and songwriters, money that would likely have been lost through piracy if the startup didn’t exist, he says.

“The music industry is changing – and we’re proud of our part in that change – but lots of problems have plagued the industry since its inception and continue to exist,” he says.

“We’re trying to build a new music economy that works for artists in a way the music industry never was before. And it is working – Spotify is the single biggest driver of growth in the music industry, the number one source of increasing revenue, and the first or second biggest source of overall music revenue in many places.”

YouTube lands indie label deal for music streaming service

Meanwhile, YouTube’s plans to become a direct competitor of Spotify continue to move forward. It has signed a crucial licensing deal with Merlin for the music streaming service it’s currently working on.

Merlin is an agency that represents thousands of independent record labels.

Messing with a competitor’s fundraising doesn’t help

Venture capitalist Fred Wilson says messing with a competitor’s fundraising is a tactic that has been around since he first entered the VC business. Recently, Uber founder Travis Kalanick admitted he tried to do something similar with Lyft, Uber’s biggest rival.

Wilson says not only is it unsavoury and unethical, like the companies that use it, but it’s also ineffective.

“If you can’t win in the market on the merits and have to turn to messing with a competitor’s fundraising, what does that tell you about the defensibility and differentiation of a company’s service?”

Overnight

The Dow Jones Industrial Average is up 1.54 to 17,615.28. The Australian dollar is currently trading at US87 cents.

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