Spotify: How did it start and where will it go?

domenyka
domenyka
Feb 28, 2018 · 9 min read

Domenyka Sarauz

Digital Distribution

Steve Cirino

March, 1 2018

Section 2

Digital Service Provider: Spotify

In the music industry, we have experienced unprecedented change in the past two decades. With the creation of Napster, consumers were no longer buying and owning music, causing for the collapse of the music industry. In the early 2010’s, Spotify was launched, paving the way for the new music industry. Spotify is up against other major streaming platforms like Apple Music, Tidal, Google Play, etc. Currently, the music industry is dependent on streaming, social media/internet, and the live sound industry to keep generating money- replacing music sales and finding other ways to generate revenue. Back during Spotify’s creation, Spotify claimed that it was an “alternative to pirating music” (Karaganis 4) while citing a Columbia University study. Today, Spotify has become the biggest music streaming platform in present society, while it has over 140 million members and 70 million subscribers. Spotify is my personal DSP of choice, as it has many advantages over it’s competing platforms. Through time, Spotify has proven to be the superior platform.

In its beginnings, Spotify was developed by a team called “Spotify AB” and founded by current CEO Daniel Ek and Martin Lorentzon. The Spotify application was launched on October 7th, 2008- it’s free membership remained invitation-only to monitor the growth of the application but it’s paid subscription was open to those in select countries in Europe, since it was not yet launched in the United States. “Spotify AB” also announced licensing deals with major music labels. In February 2009, Spotify was ready to it’s freemium version launch in the UK, only to halt registration later that year, due to high volume of Spotify members, returning to it’s invitation-only membership. On April 4th, 2011 Spotify limits free listening in order to prepare itself for the launch in the United States, which was its biggest market yet. Then, on July 14th, 2011, Spotify finally launches to the United States, which was the catalyst for its large success and revolution of the music industry. At the time, Spotify introduced three different memberships- the freemium version (free listening with restraints, with ads and shuffle on mobile), Spotify Unlimited (no ads, free listening, pick-and-play) and Spotify Premium (no ads, free listening, pick-and-play and high audio quality.) However, Spotify’s memberships have evolved greatly for the last couple of years and now comprises of much simpler subscriptions. Currently, Spotify offers four types of subscriptions; Free, Premium, Premium for Family, and Student. The free subscriptions gives you limited access to Spotify, access to the whole library, with advertisements, shuffle while on mobile, and only a week for travelling internationally. Premium gives you unlimited access to Spotify, without ads, pick-and-play on mobile, and unlimited use internationally. You are also able to “download” songs on your mobile Spotify app to listen to them offline, as this membership with cost you $9.99 monthly. Premium for Family includes all the services for a Premium account but you can have up to 6 Premium Spotify accounts for Family for $14.99 monthly. A student subscription is available to any university/college student and offers a Premium Spotify account as well as a Hulu subscription (for no added cost) for $4.99 a month.

Currently, Spotify has 140 million users on its platform and 70 million paid subscribers, which is the highest in its history and is currently projected to reach 100 million paid subscribers by 2020. Spotify makes revenue in two ways- it monetizes the freemium version with revenue from advertisements or through the paid subscriptions. However, since it is streamed music, royalties that artists on Spotify recieve are slightly skewed. According to Spotify, that “the average “per stream” payout to rights holders lands somewhere between $0.006 and $0.0084.” (Plaugic) Compared to other major streaming platforms, Spotify’s payout to artists is very low, as Tidal pays $0.0110 and Apple Music pays $0.0064 per stream. Even though it is the most popular streaming platform, Spotify ranks the third-lowest payout to artists compared to other popular streaming platforms. (McIntyre) For a track, it must be streamed over 150 times to equate the same amount as a song sale.

One of the reasons that Spotify is so popular due to its many features and technologies despite it’s extensive music library. The collaboration between Spotify and Facebook made it for music to become more social, allowing for music discovery and conversation to happen between friends. Not only does this help people talk about art and music but it has become the catalyst for music sharing and discovery. Another of Spotify’s top technologies is it’s algorithms that allows for playlist curation and radio listening. Spotify is known for its Discover Weekly playlists, which analyzes your listening throughout the week and produces a personalized 20-track playlist every Monday with songs that are similar to your weeks’ listening. Spotify is also very stats-driven, meaning that it’s Global Top 50 is truly the top 50 in throughout in the 56 different countries that Spotify is available in. Not only is this great for listeners to see and hear what music is most popular, it’s helpful for labels to see what artists are performing the best and how they can market their artists to the best of their ability. The ability to see statistics was a game changer for the industry, as Spotify has this strong advantage over other platforms. Spotify is also integrated with applications, especially with Genius, which you can see live lyrics during song playback, as well as the artist’s interpretations of the lyrics as well. These technologies are still in development and will increase as Spotify continues developing and gains subscribers.

To further analyze the use of DSP’s, I conducted a focus group and out of 30 young college students, I asked a series of questions, each with its each chart detailing the answers.

Q1: How often do you listen to music?

I asked this question to gauge the interest of listening to music generally. This helped me define the later questions in the survey. Peoples experience on their respective platform would be different depending on how much music they listen to.

Q2: What is your main streaming platform?

As shown, Spotify was the most popular streaming platform in the focus group and Youtube/Youtube Red coming in second. I believe that these two platforms are most popular due to it’s freemium accounts and no subscription is necessary.

The fact that if a user has a subscription or not will greatly influence their experience on their platform.

I asked this question to see what prevented users from getting subscription to platforms and see the desirability of subscriptions on platforms. I found the answers to this quite interesting as all the users who took the survey are students, which means they are eligible to student discounts on both Spotify and Apple Music, which raises the question of how much money do people think it right to pay for a subscription to a platform?

This was to test how effective platforms’ advertising is for new and upcoming artists and if people are aware of these curated/algothermic playlists.

This is such a big question, especially most of the people in the group had Spotify and determines whether people like their service or not.

This question was to see if people were aware of how much money is paid out to artists and if it’s personally relevant to them. Tidal boasts that they have the most payout to artists but people aren’t even aware how little an artists makes through streaming than album/song sales. About 3/4’s of users said they

I thought this question was very important to ask, to gauge how independent artists fair against artists that are signed to labels. Recently, Spotify launched a campaign called “Spotify for Artists” , which is an application where independent artists can analyze their statistics in order to further get their music listened/discovered. According to the pie chart, 80.1% of users listen to indie artists, which is great for these artists and their ability to gain streams without a label.

For the rest of the survey, I asked more specific questions about the platforms that is useful to analyze if people are pleased with their current DSP’s performance and what the DSP can do to better their experience and how they compare to one another.

Since most of the users had Spotify, 33.3% of people said the best thing about Spotify was their wide selection of music as Spotify has over 30 million songs currently on it. (Spotify Press). However, two users said that they didn’t like the fact that Beyonce and Jay-Z’s most recent albums weren’t on, since they own part of Tidal and their music is exclusive to Tidal. Personally, I don’t listen to their music so I think the music selection that Spotify has is really great. 13% of the users who have Spotify liked the fact you make your own public playlist and share them with friends, which highlights the social factor and allows not only for featured/curated playlists to exist but playlists made by regular listeners. 50% of the users who had Apple Music said that they would like to switch to Spotify if their library was not affected while the other 50% said that they would keep their subscription at Apple Music. Overall, it was very interesting to see how people use their platform and what these platforms can better and develop for themselves.

Overall, we can see the Spotify is the platform of choice for more young people, due to it’s large music selection, freemium accounts and playlists. For Spotify to continue its success, it needs to better its interface to suit all mediums of listening (smartphones, laptops, televisions, etc.) Personally, I believe that Spotify has a long way to go if it still wants to continue to beat other competitors and major music labels continue to be a part of it. Spotify has only existed in the United States for 7 years and I believe it still has much more growing and developing to do, as it is a staple and such an important part of the music industry. Spotify could introduce more services rather than just streaming music, implementing their own record label, which would give them a huge advantage over other major labels. If Spotify where to start a label, even for independent artists, these artists would have a large advantage over other artists and be able to add even more services to Spotify, other than just streaming music. This is present to a certain extent as Spotify has “Spotify Sessions”, where artists record songs exclusively for Spotify and only present to listen on the platform. Spotify has the resources and power to make this happen. However, I am still a strong advocate for other streaming platforms to exist, especially Apple Music since it’s available in so many countries. This gives me faith in the music industry which is often rumoured to be “failing” or “disappearing”. This indicates that there is people streaming music and keeping the industry alive, for both artists and industry professionals. As Spotify continues to develop and grow, I can’t wait to see where it goes.

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domenyka

Written by

domenyka

musician, artist and music industry enthusiast 🌟

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