Spotify: The Forefront of Digital Streaming

In case anyone is still unaware, the physical act of distributing music is surely dying, if it’s not dead already. As technology races ahead, it leaves behind old 45s, cassette tapes, the Walkman, and CDs of all genres. In the wake of physical media, digital media is born. Once the digital streaming market opened up, the now-titans of digital streaming quickly capitalized on the new market. The top three music-streaming platforms in the US (as of 2017) include Spotify, Apple Music, and Pandora (Hall). Of these three platforms, Spotify is conclusively on the forefront of the music streaming industry.

Spotify was first developed in 2006 by Daniel Ek (CEO) and Martin Lorentzon (Co-founder). In a truly grass roots type story, Ek recalls naming the company after mishearing a company name Lorentzon suggested. The two found that typing “Spotify” into Google came back with zero results and quickly bought the domain name. Since then the term Spotify has often been justified as the combination of “spot” and “identify”. Regardless of what the etymology of Spotify may be, the company gained a great deal of popularity in their formative years. What put Spotify on the cutting edge was the possibility to listen to a seemingly infinite number of songs from your personal computer. Of course, there was one more thing that sweetened the pot a bit. How much does it cost to access infinite music anywhere that has Wi-Fi? Absolutely nothing. Today, Spotify still offers a free listening experience although the features of the application are limited. The only perk to the free version of Spotify is the option to shuffle and, often times, shuffling can be a double-edged sword. To put it gently, Spotify really entices listeners with monthly subscriptions. For $9.99 a month Spotify offers the same shuffle feature, as well as ad free listening, unlimited skips, offline listening, and high quality audio files. Imagine it is 1997 and you figure it’s about time upgrade your sweet CD collection. You want to add “OK Computer” by Radiohead, “Reload” by Metallica, “The Colour and the Shape” by Foo Fighters, and (naturally) “Now That’s What I Call Music 37”. An endeavor such as this would cost about $40 at the local FYE. Today, in 2017, $9.99 will get you all of those albums and literally thousands more. As if that wasn’t convenient enough, Spotify also offers discounted rates for students ($4.99 a month), and family plans ($14.99 for 5 people). Spotify recently collaborated with Hulu to offer both services to students for the same monthly price of $4.99. So the question becomes who wouldn’t just sign up for Spotify’s monthly subscription?

Shockingly, of Spotify’s 140 million active users, only 60 million are paying subscribers (Walker/Spotify). These statistics really show how far free services will reach in the modern technological age. Based on Spotify’s growing user rate, the application is expected to break 100 million subscribers in 2020 (wauterd). And while we’re talking about numbers, let’s take a look at just how much music is available on Spotify. With an estimate of 20,000 songs added each day (Spotify, 2014) the total song count reaches over 30 million songs and over 2 billion playlists. 2 billion playlists. You may be thinking, “How can Spotify afford to pay the artists responsible for 30 million songs?” As with many big business models, Spotify’s payout rates vary on a number of factors, but the bottom line is that most artists receive anywhere from $0.006 and $0.0084 cents per stream (Plaugic). To put this in perspective, let’s say you streamed your favorite album 300 times in a year. If you multiply the number of listens by even the top most margin of Spotify’s price point (300 x 0.0084) the band is walking away with $2.52 of your dollars for the year… pretty pathetic. On the flip side, the rapper Drake was Spotify’s most streamed artist of 2016 (Spotify). With about 1.8 billion (yes, we’re in the billions again) total streams, Drake walked away with about $15 million from Spotify alone.

So, besides the numbers, what puts Spotify on the cutting edge? Spotify’s statistics support that it is indeed a powerhouse of a streaming platform, but what makes it better than any other platform? Let’s start by comparing it to the other titan of music: Apple. Since the invention of the iPod, Apple took hold of the music purchasing market and did not let go. When Spotify began taking loyal fans away from Apple, Apple retorted with their own streaming service know as Apple Music. Apple Music promotes 40 million songs in their library in addition to customizable and curated playlists. Sound familiar? Apple also really pushes the fact that they do not interrupt music with ads, and anyone can listen at anytime regardless of their Wi-Fi status. The only real difference between Apple and Spotify is that Spotify offers a free version. With the exception of the free option offered by Spotify, Apple has directly matched Spotify’s subscription fees for student plans, family plans, and individual subscriptions. There are thousands of minute details that differentiate Spotify from Apple music but the real take away from subscribers isn’t the price, it’s usually about the playlists. Until Apple music finds a comparable algorithm that will match Spotify they will always lose out. Spotify will remain on top because of their accessible user interface and their cutting edge team that ensures users are experiencing an influx of new music specifically catered to the individual. When comparing the slightly lesser known DSPs (Bandcamp, Soundcloud, Pandora etc.), it’s important to keep in mind that Spotify works with a team of around 2,100 employees (as of a 2016 Statista study) so they’re naturally going to have a stronger work force to ensure the best quality. Nonetheless, let’s see how the lesser used platform like Pandora fares. Between Pandora and Spotify the superior streaming platform is readily apparent. Pandora users don’t get to choose what songs they listen to. It’s like comparing an iPod shuffle with the latest model of the iPad; there’s just no competition. Where Spotify offers 30 million songs, Pandora clocks in at about 1 million songs. Pandora has offered it’s own Premium versions (known as Pandora Plus and Pandora Premium). Similar to Apple Music, Pandora offers offline listening (limited availability for Plus users) and, similar to Spotify, Pandora Plus and premium users can replay a song after it has played through once. Keeping with the trend of similar price points, Pandora Plus is $4.99 a month and Pandora Premium is $9.99 a month. But unlike Apple and Spotify, Pandora’s $4.99 subscription only grants users access to a few features of a full subscription. When it comes to DSPs like Bandcamp or Pandora, it’s a little like comparing apples and oranges. The common link between the three DSPs is the emphasis on music discovery. Bandcamp and Soundcloud allow artists to post music directly to their website. Because of this, the platforms are better for finding up-and-coming artists. Spotify also features newer artists, but in different ways. Spotify features new artists in a playlist entitled ‘Tomorrow’s Hits’, with over 60,000 subscribers.

Enough of the number talk, let’s put Spotify to the test. In a poll of seven college aged music students (the authority on what’s up-and-coming for all things music technology) all seven has either the free or the full version of Spotify. The five students who pay for premium service all take advantage of the student discount, and of the five, two students combined their Hulu and Spotify subscription. Reasons for switching from free to premium were typically due to the ad breaks, or the quality of the music. When asked about Spotify’s best feature, the group was relatively split. The results are shown in the graph below.

The best summarization for the ‘best feature of Spotify’ is likely how easy it is for a user to find new music. All of these features bring similar artists to the subscriber using data analytics.

Finally the students were asked if they had the opportunity to change one thing about Spotify, what would they change. The results are as follows:

Only one student claimed that Spotify had reached its peak. Another student talked about the song limit for each user’s personal library of saved songs (which is about a 10,000 song limit). Some students felt as though it was not enough space for all of their songs, especially since users maintain no ownership over the music. Music libraries are a way for subscribers to keep track of what they like to listen to and what they would like to listen to again. The students shared personal experiences with encountering glitches on the mobile interface of Spotify for the Android. Along the same lines, students had complaints about glitches in their libraries when moving from the desktop version of Spotify to the mobile app. Mostly the complaints were about minor bug fixes and improvements. It speaks volumes to Spotify’s customer support that the only problems for such a large platform came down to minor technological issues. As for the song cap, it seems likely that Spotify will expand the cap in the coming years in order to stay competitive with Apple Music’s 100,000-song limit.

Spotify seems to be on the forefront of every aspect of the digital music world. With such a large company constantly working to improve and expand, the future looks very bright for Spotify. In the present time, Spotify dominates the other DSPs on the market in terms of algorithmic data, user customization (in terms of music preference), and free access to their expansive music library. Spotify’s alliance with Hulu shows a promising step into converging music and video streaming platforms, this seems to be where the digital world is heading. For an innovative company, such as Spotify, there are no foreseeable limits to what this platform can achieve.

citation: https://docs.google.com/document/d/1uBZ1m_F5-5T-I9cAf7E51BU2g6UQFazEDL-bL0p1gs8/edit?usp=sharing

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