Spotify and Today’s Digital Streaming

Eoin Murphy

Prof. Stephen Cirino

Digital Distribution

26, October 2017

In today’s music industry, it is clear that streaming platforms have become the primary format in which music is consumed. With platforms like Spotify, Apple Music, and countless others leading the pack in music consumption, music has never been more accessible. However, with so many different streaming platforms to choose from, it begs the question of which platform will be the most innovative and separate themselves from the others. While each streaming service has characteristics unique to itself, they all more or less follow the same setup. This current state allows for substantial evolution from any one of these emerging streaming services. However, looking at these different platforms, the one that seems to possess the most potential is Spotify.

Founded on April 23, 2006, Spotify is a streaming service specializing in video, podcast, and music streaming. The company’s headquarters are located in Stockholm, Sweden and the company’s founder and CEO is Daniel Ek. The company is available in most of the Americas, Australia, New Zealand, parts of Asia and Europe. As of February 2017 the company announced major expansions to its U.S. operations and now has a headquarters in New York City.

In comparison with the other streaming services it competes with, Spotify has certain characteristics that help it stand out from the herd. For starters, Spotify has the largest song catalogue of any of the DSPs (Digital Streaming Platform) with over 15 million songs. This is one of the many reasons it is such a popular service, because it caters to people of all music tastes. Secondly, it possesses the ability to play tracks locally or download them from Spotify via a Wi-Fi connection, thus forging your own music library with the millions of songs that Spotify already provides. This feature, along with their different subscription options is often the biggest selling point when looking at the differences between Spotify and one of the other DSPs.

When singing up for a subscription Spotify has taken their streaming service and broken it down into a few different categories. One of these categories is a “Freemium,” version that allows users to listen to up to three selected songs at a time, before the service starts playing advertisements in between tracks. Users can also create and follow playlists, have access to curated playlists like Discover Weekly, and follow other users and their musical choices. The second category is the paid subscription known as “Spotify Premium.” This subscription costs $9.99 a month, and allows the user complete access to millions of songs with no advertisements, a high gloss listening quality, while still including complete access to all playlists, both self made and curated by others. Recently, Spotify has also announced a family subscription plan as well as a student discounted version of premium. The family plan costs $14.99 a month and allows up to six users at a time, while the student version costs $4.99 and even comes bundled with a subscription to Hulu, a TV and movies streaming service. This new addition was met with mass enthusiasm from Spotify users, and definitely helped to further separate Spotify from its competitors.

As of March 2, 2017, Spotify stated to have 50 million paid subscribers on their platform. This number continues to grow as Spotify currently has somewhere around 100 million subscribers, both paid and non-paid. Below is a graph charting Spotify’s paid subscribers growth from March 2011 to March 2016. We see from the illustration below that Spotify had 40 million paid subscribers at the start of 2016. Therefore in the past year Spotify has gained another 10 million paid subscribers, with that number increasing daily.

While it is important to point out the aspects of Spotify that have led to its success, it is just as important to talk about the competition the company faces. With numerous other streaming services in the running, Spotify has their work cut out for them if they plan to be the most popular option when it comes to music streaming. When it comes to other DSPs that are commonly used, some of the most popular household names include Apple Music, Google Play, Deezer and Tidal. Where Spotify pulls away from its competitors primarily is simply in catalogue size. DSPs like Deezer, Tidal, and Google Play simply do not have the same sized library that Spotify boasts. However, while DSPs like Tidal, Deezer, and Google Play can’t truly compete with Spotify, Apple Music has recently become Spotify’s biggest competitor. Launched on June 8, 2015, Apple music is a digital streaming platform owned and operated by Apple Inc. The platform is available in the Americas, Asia, Europe, Africa and the Middle East. When it comes to pricing Apple Music follows the same model as Spotify, with a normal subscription costing $9.99, a family subscription costing $14.99, and a student subscription costing $4.99. However, while Spotify offers a Freemium version of their service, Apple Music only offers paid subscriptions. Apple music also boasts an Internet radio station called Beats 1 that broadcasts around the world 24 hours a day, and contains exclusive content from numerous top 40 artists.

While Spotify is still leading the pack in terms of sheer numbers, it is important to point out that Apple Music has quickly caught up to Spotify in the two years they’ve been operating. In its first six months, Apple Music surpassed 10 million subscribers, and as of September 2017 currently has around 30 million subscribers. Below is a chart from March to July of 2016 showing both Apple Music and Spotify’s growth.

From the graph above it is clear that Apple Music is still second to Spotify by a large margin, it is important to remember that Spotify has been around for eleven years while Apple music is only two years old. This poses the question of whether or not Apple music will surpass Spotify in the coming years. With backing from Apple, one of the most well-known tech corporations in the world, there is automatic brand recognition with Apple Music. However on the other hand, Spotify has had eleven years to establish themselves and have successfully done so, thus making it very difficult for another DSP to come along and take over the throne.

As a college student in an urban environment, I decided to set a up a focus group to further my research. The focus group was designed to see how most people consume their music today. For this group I gathered 15 people from different majors and different musical interests to attempt to see whom out of them used Spotify and who used a different DSP or other form of music consumption. One common thread that should be noted about this focus group is the popularity that physical music consumption still holds. Out of the 15 people interviewed, 11 frequently purchased both vinyl records and CDs. All of those interviewed who said they purchased physical music stated it was because of the extra aesthetic, and typically to support a favorite band or artist.

When asked how they consumed their music on daily basis, 10 out of 15 people used Spotify to listen to and discover new music. Furthering this data, out of those 10 people who used Spotify, 9 of them were paid subscribers with 7 of them being normal premium accounts, and 2 of them being part of a family premium plan. For those who signed up for a paid subscription, 100% of them stated their reasoning for singing up was a combination of wanting the freedom to stream anywhere that Premium offered, mixed with the growing number of ads that are placed in between songs in a Freemium subscription. Of the remaining 5 people, 4 of them used Apple Music and 1 of them used Tidal. When asked why they chose these other DSPs over Spotify, 3 of them stated it was due to existing accounts that family members had that they could easily gain access to, while the remaining two said it was due to certain features unique to Apple Music and Tidal such as the Beats 1 radio or the high quality, lossless format offered by Tidal.

While we as consumers can speculate how we think Spotify and the other DSPs will continue to evolve, only time will truly tell. In a modern age where people have instant access to almost anything, music distribution has grown to be at the forefront of technology. For a company like Spotify, it will be interesting to see how they continue to evolve with other DSPs running similar successful models. The company’s recent pairing with Hulu is a step in the right direction, and could open the door for more collaboration between Spotify and another major company. Another possible scenario could be Spotify buying out some of the other large DSPs and gaining a monopoly on music streaming. Even though companies like Apple music have gained a substantial following, they still have a long way to go if they want to catch up with the ever-growing numbers that Spotify has attained. Even though this is a possibility, Spotify has shown no signs of slowing down making it that much harder for other DSPs to surpass them. The massive following that Spotify has attained has been carefully researched and thought out and has resulted in a company that is not only sustaining itself in a crowded market, but is experiencing substantial growth. All in all, while the market of digital streaming platforms has become saturated with options, Spotify has positioned itself to be the clear leader amongst numerous options for music consumers.

Link to Works Cited Google Doc- http://hyperurl.co/p485o6