How Spotify Came to Dominate the Music Industry
In the modern day of music listening, streaming services are the public go-to. While vinyl, tapes, and CDs are still sold by artists, they often land more in the realm of merchandise than listening material for audiences. With the widespread availability of music provided by Spotify, Apple Music, Amazon Music and more, it’s no wonder that the average listener utilizes these platforms. Among these streaming services Spotify sits at the top, dominating the streaming industry by a considerable margin. To truly understand how this came to be, we need to dive into the history of the company and the effect its quick popularization had on the music industry as a whole.
Spotify started as a small startup company in Sweden in 2006, developed by Daniel Ek and Martin Lorentzon (Dalgac 2019). While it wasn’t released to the public for another two years, Spotify from the start was a clear solution to the issue of music piracy, something other companies hadn’t been able to resolve. Offering musicians compensation in ways that websites like Napster were failing to do, the public release of Spotify was delayed until October 7th of 2008 due to the complexities of negotiating licensing royalties with record companies. After showing success in Europe, in 2011 Spotify launched in the US, competing with iTunes, Pandora, and Amazon Music at the time (Dalgac 2019). Utilizing a ‘freemium’ option, Spotify jumped ahead of its competitors because of the accessibility to everyone even if they didn’t pay for a subscription at the expense of listening to advertisements every few songs. Still to date, Spotify’s freemium service is one of the most important contributors to its success, especially considering that its biggest competitor Apple Music has been firmly against the freemium service model for years.
In 2016, Spotify put a heavy focus on playlist advertising, creating hundreds of personalized playlists for its users. The curated playlisting model attracts hundreds of thousands of new users each month, offering more personalization than any other streaming service. Some of Spotify’s other distinct features are tethered downloads for listening to music offline, discounted prices for family/student plans and a friend system to share your playlists with others (“Premium Plan” 2023). Spotify also offers artist recommendations through playlists and artist pages, and allows users to connect to multiple devices such as gaming consoles, smart watches, and TV systems (“Supported Devices” 2023).
While the regular subscription price of Spotify is $9.99 per month, the company offers 3 other pricing plans for users: the Duo plan, the Family plan, and the Student plan. The duo plan allows 2 users to pay $12.99 per month for 2 premium accounts, directly aimed towards couples on the Spotify website. The family plan offers 6 premium accounts for $15.99 per month, with the added option to block explicit music for one or more of the accounts as well as having a Spotify Kids application for younger users. The student plan offers a single premium account for $4.99 per month, which offers a combined Hulu (with ads) subscription (“Premium Plans” 2023). With all of these features and pricing plans, Spotify has grown to have over 400 million monthly users, supported by over 11 million artists with over 100 million songs (Ruby 2023).
While extremely successful, Spotify is often looked negatively upon by recording artists and musicians due to its royalty payments to artists (or lack thereof). Currently, Spotify pays between $0.003 and $0.005 cents per stream to the rights holders of an artist’s music (“How Much Does Spotify…” 2023). If an artist is signed under a record label that takes 50% of their streaming revenue for example, an artist might end up earning $0.0015 per stream. It’s fair to say that due to this, artists find it incredibly difficult to make money from Spotify streams and are forced to find other revenue opportunities to make a living wage. The miniscule royalty payouts are the biggest issue artists have with Spotify, but other streaming services aren’t necessarily better. Apple Music for example pays artists roughly $0.01 per stream, but under the same record deal as before an artist would still only be paid $0.005 per stream, still making it incredibly hard to achieve a living wage off of purely streams alone (“How Much Does Apple…” 2023).
Apart from royalties, Spotify and Apple Music have a number of differences that contribute to them being the two largest competitors in music streaming. Spotify has over 400 million monthly users, while Apple Music has over 95 million monthly users (“Number of Apple…” 2023). While Spotify utilizes the freemium subscription model, Apple Music instead utilizes 1 month long free trials for users, and up to 6 month free trials if they buy a new Apple Device. Both subscription services offer 4 different payment plans, with Apple Music sharing the same individual, student, and family plan model that Spotify has for $1 more than the corresponding Spotify prices (“Choose the Right Plan for You” 2023). Instead of a duo plan, Apple Music offers a budget Voice plan that removes offline listening and certain features such as guaranteed lossless audio and the friend system for $4.99 per month.
In terms of accessibility, Apple Music isn’t compatible on as many devices as Spotify is, but being an Apple company application it can be used on every Apple device without issue. Spotify attracts a large portion of their users through their podcast support, while Apple Music doesn’t offer podcasts in their services as Apple Podcasts is an already existing separate application (Willings 2023). Apple Music allows for users to watch music videos, interviews, and mini-documentaries from their favorite artists, while Spotify offers canvas, where short clips chosen by artists loop on the screen to their songs (Wanjala 2023). One of the main differences in offline playing is that Apple Music doesn’t allow users to queue songs that aren’t downloaded when their device isn’t connected to the internet, while Spotify lets users queue songs that aren’t downloaded even when the internet isn’t connected, loading them later when a connection is re-established.
Going back to royalty payments, many artists have been able to find great success through Spotify, earning millions of dollars from streams. The most notable example of this is the artist The Weekend, who is currently the most streamed artist on Spotify with just over 108 million monthly listeners. With only 4 of his songs holding a total of roughly 9 billion streams, The Weekend has earned over $36 million from just a handful of songs, showing just how much Spotify can benefit artists if they reach a wide enough audience. He also holds the record for the most streams on a single song, with over 3.5 billion streams on his 2020 song “Blinding Lights”. His music is found on countless Editorial playlists and millions of user generated playlists, demonstrating the presence The Weekend has on the streaming platform. However, most artists aren’t able to attain this kind of success. Many are frustrated with the royalty payouts from Spotify, enough to remove their music from the platform in protest.
In 2013, Radiohead’s Thom Yorke and Nigel Godrich removed the band’s music from Spotify. The band has voiced their frustrations with the platform and its impact on the music industry, and while they stood by their choice to remove their music, it has slowly but surely returned to Spotify’s library (Levine 2017). Despite their large audience on the platform, the band members of Radiohead have continued to speak against the streaming service in defense of smaller artists who aren’t able to Radiohead wasn’t the only band to do this, as Taylor Swift is another popular artist who pulled her music from the platform (and eventually returned it) due to the low royalty rates from the company. While Radiohead and Taylor Swift have still found success on Spotify, the majority of artists found on the platform aren’t able to earn living wages from streams alone, as it’s incredibly difficult to get into mainstream playlist rotation, as well as competing with the 11 million artists on the platform.
After researching the success of Spotify and its differences from other streaming platforms, I wanted to ask my peers what streaming services they used, especially considering that many of my classmates and friends are musicians themselves who are familiar with the inner workings of Spotify and its relationship with artists. I created a poll for 15 of my classmates, asking what streaming service they used and why, asking each person more specific questions based on their answers. 12 of the interviewees used Spotify, while the other 3 used Apple Music. I wasn’t surprised at the stark contrast of streaming service users in the group, but I was surprised at the main reason many of them used the service. Most of the pro-Spotify interviewees stated that it was because Spotify was cheaper and more popular than Apple Music, and that having the free version led them into buying or sharing a premium subscription. There was a shocking amount of praise for the web version of Spotify, which lets users have more control over what songs they listen to and playlists in the freemium version. A few of the interviewees specified that Spotify was easier to get for free from a friend’s subscription or a family subscription, and about half stated that the user interface and design of Spotify was more appealing and contributed to their use of Spotify. The Apple Music users reasoning was that it came free with their devices and they didn’t want to transfer all of their playlists and listening statistics to Spotify once the free trial expired, and only 1 of the Apple Music users preferred the user interface and design over Spotify’s.
The most important information I gathered from this group questionnaire was that every single interviewee was aware of the royalty payouts from both Apple Music and Spotify, yet most of them still chose to use Spotify over Apple Music. This self-awareness from the Spotify users, many of which are trying to make a career in music, shows just how powerful of a hold Spotify has on the music industry with its current business model. Various users that are actively affected by the low royalty rates still chose to use Spotify for a variety of reasons, but the clearest one being that it’s simply more convenient than anything else.
Overall, Spotify has a number of benefits and pitfalls for artists but no real disadvantages to the average music consumer. Having access to hundreds of millions of songs for an extremely low price, being presented with both publicly curated and personalized playlists daily, and the overall price and accessibility of Spotify makes it a clear choice for listeners across the world. Regardless of how many artists push back against the platform, as long as users are able to listen to as much music as they want for as cheap as possible, the music industry won’t shift away from the current streaming subscription model. That being said, Spotify is already changing their business model slightly, helping to grow their reach to an even wider audience. The combined student plan with Hulu and the integration of podcasts reflects how Spotify is moving to maintain their lead in the music industry, even if it requires extending their reach into non-music territory.
From an artist’s perspective, I’m extremely concerned for the future of the music industry and an artist’s chances of success. While putting music on streaming services has become extremely easy to do, the difficulties of reaching audiences have almost compounded due to the heavy user reliance on playlists and finding artists through the algorithm. I feel that if the algorithm were adjusted to be kinder towards smaller artists and help boost their reach, the issues of small royalty payments would be less impactful to an artist even though it wouldn’t solve the issue entirely.
Spotify is at the top of the music industry food chain and it’s clear why they’ve maintained their lead from the start. I’m hopeful that they’ll be influenced by the growing number of artists protesting their platform and the growing awareness of their royalty payments by audiences, but until another competitor is able to beat the convenience and accessibility of Spotify they will continue to dominate the music streaming service industry.