Laura Jorinde Overbeeke
26th of October 2017
Spotify As A Digital Service Provider
In the following article I will be sharing information on digital service provider Spotify. I will be diving into its basic history, discuss its features and offers for consumers and compare those to the offers and features of other digital service providers. I will also present the results from a survey I have taken on the music consumption habits of college students where drawing a conclusion from their answers will allow me to shed a light on if and how Spotify is a part of their music consumption, compared to other digital service providers.
Spotify is an on demand streaming platform launched in 2006, founded by Martin Lorentzon and current CEO Daniel Ek in Stockholm, Sweden. It offers the on demand streaming of podcasts, music and videos. Spotify offers a freemium service, meaning customers are able to create an account and enjoy videos, podcasts and songs for free with certain limitations and being required to listen or watch advertisements in between the audial or visual content. In order to get rid of the advertisements and having access to several additional features, the customer has to upgrade to a paid subscription (1).
Spotify is available in more than fifty-nine countries. As of June 2017 it is counting up to a 140 million users of which 60 million are paying subscribers (2). The platform offers up to a 30 million songs, allowing customers to browse through its contents using artists, albums, genres and playlists as its parameters. Users are able to create playlists of songs, alone or with other Spotify users and also share their favorite tracks or playlists on social media.
Spotify also offers algorithmically curated playlists. These playlists are not created by people but by the computer based on the analytics of the customer’s music consumption behavior. A few examples of these playlists are Discover Weekly, Daily Mix and Fresh Finds (3). This is a way for customers to discover new music within the same genre as the songs they’ve already been listening to.
As of now Spotify offers five different subscription types to quote: “suit any lifestyle and budget” (4). I will discuss each one of them briefly. First of all there is Spotify Freemium, offering on-demand, ad-supported access to the Spotify content on computers and tablets and ad-supported shuffle-only access on compatible mobile devices for free. Spotify Premium offers unlimited streaming access to the Spotify catalogue on your computer, laptop and mobile devices, allows users to download songs onto the Spotify music library so they can listen them offline and has no advertisements in between songs. The cost is $9,99 dollars per month. The student discount version of Spotify Premium offers all of the same services, with a discount of 50% for college students who are enrolled in the list of schools provided by the Spotify website. Even if their school is not listed, students can request SheerID to get their school added to the list by filling in a form on the Spotify website. Premium for Family offers a bundle of up to six separate Spotify Premium accounts with one monthly subscription for $14,99 per month. By purchasing Premium for Family the user must agree to only include people within the subscription who live at the same address. Lastly, there is an option for Premium plans with other companies such as a broadband or mobile service provider, the details of which are varying per company and should be available on their own websites. This arrangement allows the customer access to multiple services at a reduced rate.
Now that we have talked about what Spotify offers to its users, let us take a look at how the artists they are listening to are earning their money. In an article at ‘Information Is Beautiful’ they state that Spotify pays out $0,0038 per stream to unsigned artists and $0,0044 per stream to unsigned artists (5). I will dive deeper into these payouts as I will compare them to those of other digital streaming services a little later.
Now that we have an idea of what Spotify has to offer, let us take a look at some other digital streaming services out there.
Apple Music is available on all Apple devices and offers iOS and MacOS integration such as using Siri to navigate through the Apple Music library. Also, Apple Music tops the Spotify download capability with offering space for 100,000 downloaded songs, instead of Spotify’s 9,999. Another popular feature of Apple Music is their 24-hour live Beats 1 Radio, curated by famous DJ’s and celebrities, often premiering new pop songs. Apple Music does not offer a freemium service, but is available for $10 a month for a single user account, $5 for students, $15 for a family account up to six users and also offers those who already subscribed to pay $99 for an entire year, saving the subscriber $20 a year in total. Apple Music is available in over 110 countries, 59 more than Spotify (6).
Tidal is an ad free digital streaming service whose most important feature is that it offers the streaming of high fidelity audio and high quality music videos. The platform doesn’t work on a Freemium base but offers a variety of subscription accounts. It will cost subscribers $10 a month for Tidal Premium giving them access to standard quality tracks (same quality as Spotify) and high quality music videos and $20 for Tidal HiFi adding the opportunity of streaming songs in high quality 24-bit 1411kbps audio. They have a student plan offering the same two choices in subscription with 50% off of the price, a family account for up to five members, which costs $14,99 for Premium and 29,99 for HiFi. They also offer a military plan with 40% off any of the two prices. They have a thirty-day free trial, the streaming platform is compatible for any phone, tablet or computer and customers can download songs to listen offline with any kind of subscription. Tidal gives access to a catalog of 46 million songs, which is a 16 million more than on Spotify (7).
Soundcloud is a platform where any artist can make an account and upload their music. This makes it a DSP many music fanatics use to discover new indie music, whereas the DSP’s we have discussed so far focus mainly on more established artists. Soundcloud offers a freemium, ad-supported version giving users access to about 120 million user-added tracks, an add free version for $5 a month and an upgrade for $10 offering everything listed above plus access to a 30 million major label tracks (8). Apart from their ‘who to follow’ suggestions (similar to friend-suggestions on Facebook) Soundcloud does not offer any algorithm-curated or user generated playlists. It is a DSP most suitable for those who like to actively dig through accounts looking for their new favorite underground artist or track.
Pandora is a little bit different than the rest of the DSP’s I have discussed because it did not start out as an on-demand service, but like a personal radio stream. It creates a personal (never-ending) playlist for you to listen to through an algorithm based off of any artist, album or genre you type into the search bar at the beginning. You have the ability to skip through to the next song if you do not like the current song. Its freemium version is add-based, the add-free version will cost you $5 a month, and the fairly new subscription offering the personal radio plus access to about 40 million on-demand songs to stream is available for $10 a month (9).
Now that we know what these five DSP’s have to offer to their customers, let us take a look at which one is the most artist-friendly considering pay outs, because the differences are quite significant. Let me tell you first that streaming has significantly changed the music industry (10). Going from a music being a physical product in the form of a record that people used to buy in stores, changing over into a digital product that people could purchase online where an online store such as iTunes gave them the opportunity to buy single songs instead of having to buy a whole album and then that evolving into an era where we do not even feel like we need to neccererely ‘own’ the song — either in the form of a physical record or as a digital file on our computer — but we only need access to it, here is when streaming came about. With digital music services people have access to a massive amount of songs to pick from, for free with some adds in between and even without adds for a mesial five, ten or maybe twenty bucks a month.
So what does this mean for the artists? It means artists get paid out per stream of a song. Let us take a look at those numbers, starting with Tidal. Because Tidal was build with the intention to raise the artist’s pay for streams. The service is ranked second on Forbes Magazine’s list of which digital music service pays out most with Tidal paying out $0,010 per stream (at the top of the list its Napster paying out 0,0167 per stream) to their artist. Third on the list is Apple Music with $0,0064 per stream and number six and seven (after Google Play and Deezer) there is Spotify paying out $0,0038 per stream and Pandora with 0,0011 per stream (11).
Looking at those numbers you would believe every artist would want to turn to Tidal solely to put their music on but, maybe surprisingly, while Tidal offers about the same things, access to more songs and the option to go high fidelity, a lot of people do not choose to get an account on this digital streaming service. There are a number of reasons for this that I will discuss later. Coming back to the point that even when Tidal pays out more per song, if the song gets played say ten times more often through Spotify or Apple Music, those are the DSP’s the artists are making more money of off than Tidal, so turning solely to Tidal to put your music up would be a stupid idea. I think this graph I found on Information is Beautiful (12) gives you a pretty clear picture of how the pay out per stream and the amount of streams balance out against each other.
To get a closer look on how my peers experience and consume the music they are into I have interviewed eight college students about their music consumption behavior. The group consists of two people studying something totally non-music related at the University of Pennsylvania in Philadelphia, two music students from the University of Arts in Philadelphia, two music students from Codarts University of the Arts in Holland and two non-music students from Holland. I wanted it to be a divers group so I could measure if there were any differences between both countries and if musicians would give different answers than non-music majors.
The first question I asked everybody is what platforms or mediums they use to listen to their music. Six out of eight people listed Spotify as their number one go-to, the guitar student from UArts listed Apple Music instead. The one I was surprised by was the drum student from Codarts (Holland) who told me he did not use any on demand streaming service except for YouTube. I had expected that somebody who is a musician himself would want to spend money on a subscription to a platform where he would have access to a lot of music. However, he wrote down that apart from YouTube he listens to the radio and uses iTunes to buy music. He also said that if he is really into a band he will buy their record straight of off their website. After reading his answer and overthinking it, his way of consuming music started making more sense to me. I think as a musician you might be more specific of what music you listen to and access to somewhat 30 million songs can just be way to much to choose from. Also as a musician, you might be more conscious of how buying an album supports the artists you are into.
Five other people listed YouTube as their place to listen to music. Apart from that, two of the four musicians plus Dutch photography student listed they still buy vinyls. The one Internet radio that came along in the survey came from a Dutch mechanical engineering student (who also happens to play saxophone) and this was a French radio station called Radio FIP. Nobody listed they use Pandora or Tidal for anything.
I also asked my surveys what mediums they use to discover new music. Many of them listed Spotify as their go-to. They either use the curated playlists such as Daily Mix, or share playlists with their friends to swap out new tunes. Actually six out of eight people confirmed they get to know a lot of new music through their friends. The drummer added to this that he sometimes discovers new music through reading music-related blogs. The photography student from Holland wrote down she finds a lot of music she likes from the music or series she watches. Half of the people listed You-Tube as their second go-to to find new music.
Six out of the eight people I interviewed have a paid subscription to a DSP of which five of those are Spotify Premium accounts. To the question why they upgraded to Premium they answered getting rid of the advertisements and being able to download the songs to listen to them offline is totally worth the student discounted $5 per month price. The two people who did not have a subscription to Spotify Premium were the guitar student from UArts who has a subscription to Apple Music and the saxophone student from Holland who is the only one who uses Spotify’s Freemium version.
The last, somewhat confrontational question I asked these people was if they would be willing to start using a different DSP if they knew this one paid out more money to the artists. The over-all answer I received is that they would only consider it if that DSP would offer the exact same features and would cost exactly the same as the DSP they were using right now. They were honest in saying they put their own needs before those of the artists, even some of them who are musicians themselves. However the drum student and the photography student (both from Holland) answered that they would want to do that, while the photography somewhat bitterly put her answer this way: “Well I am poor myself right now, but if I had the money I totally would”.
Looking at the results of my survey as well as the information I looked up I can say Spotify is definitely the DSP one that is used the most. I think this is because even though it does not necessarily have all of the best features, it has the best combination of features for people to use it. For example Apple Music has a higher download capability but simply not everyone owns a Macbook and or iPhone, a lot of people nowadays have unlimited internet on their phones whereas they do not need to download the songs in order to listen to them and honestly a thousand songs (Spotify’s cap) is already a lot, who needs a 100,000? Soundcloud might be the only platform that gives access to user uploaded songs as well as 30 million songs from signed artists, but unless you are a music fanatic who loves digging through this digital indie catalog there is no real reason to prefer Soundcloud to Spotify. Pandora is something a little bit different, because I do not think a lot of people would be satisfied with only a curated playlist to listen to. I expect they will want to pick their songs at certain moments. I think an important advantage Spotify had over Pandora and all the other DPS’s is their on-demand Freemium version. No free trial, but free unlimited on demand playing with some adds in between. This tops Pandora because even though Pandora does have an unlimited freemium version, that one only gives access the radio and not to their on-demand song streaming. Lastly, it took me some time to figure out the reason why people did not use Tidal so much, as it has the highest amount of songs and videos, pays out the highest revenue to artists of every DSP I discussed, costs exactly the same as any other premium account and offers the customer an opportunity to upgrade to a HiFi account to listen to the songs in the best quality possible. Firstly I think Spotify tops Tidal as well with their freemium version. People who are not sure about turning to a DSP in the first place can take as long as they want to get used to it and decide if they think its worth upgrading to a premium account which puts way less pressure on them than Tidal’s limited thirty day trial. Also, I found an article on Digital Music News that discusses a few other reasons for people turning away from Tidal (13). For example the HiFi upgrade that Tidal promotes itself with, in fact only a number of people will be willing to pay double the price of about any premium account for. The majority of people do not own sound system or the high quality headphones where the difference in quality actually is actually that significant. Also, the HiFi account has been cooping with some serious streaming issues because those big high quality audio files took a long time to load, which ruffled a lot of feathers among customers. And then lastly, and to my opinion most interesting reason people do not go with Tidal, is that one of the platform’s biggest advertised promises is it stands for a reasonable pay out towards musicians, starting with the launchers of the platform among who Jay-Z, Beyoncé, Madonna and Taylor Swift. You could say the platform was launched out of self-interest of artists who are actually already making a lot of money, and the platform’s pay raise will actually not help the million other more unknown artists who are actually struggling to make money of off their art get by. I could understand how this could give most customers a nagging feeling of false pretenses when Tidal uses this slightly guild tripping standpoint in their advertisements.
Based of off my research I think its safe to say Spotify is an excellent choice of a digital streaming platform for the majority of the music lovers out there. It would be great if they could come up with a way to pay out a decent amount of money to their artists, but from a customers’ point of view Spotify is the place to go to experience and enjoy your music.
1. No name. “Spotify”. Wikipedia. 26 October 2017.
2. Cirino, Stephen. “Digital Distribution”. Terra Hall at the University of the Arts, Philadelphia. September 2017. Lecture.
3. Cirino, Stephen. “Digital Distribution”. Terra Hall at the University of the Arts, Philadelphia. October 2017. Lecture.
4. Official Spotify Website. Spotify Premium. Web. 23 October 2017.
5. No name. “Digital Music Streams Compared”. Information Is Beautiful. June 2017. Web. 23 October 2017.
6. Hall, Parker. “The Best Music Streaming Services”. Digital Trends. 22 June 2017. Web. 24 October 2017.
7. Official Tidal Website. Tidal Subscriptions. Web. 24 October 2017.
8. No name. “Available Subscriptions”. Official Spotify Website. No date. Web. 23 October 2017.
9. Hall, Parker. “The Best Music Streaming Services”. Digital Trends. 22 June 2017. Web. 24 October 2017.
10. Levine, Aaron. “Music Business”. Gershman Hall at the University of the Arts, Philadelphia. October 2017. Lecture.
11. MacIntyre, Hugh. “What Do The Major Streaming Services Pay Per Stream?” Forbes. 27 July 2017. Web. 24 October 2017.
12. No name. “Digital Music Streams Compared”. Information Is Beautiful. June 2017. Web. 23 October 2017.
13. Hall, Parker. “Why Tidal Is Doomed To Fail”. Digital Trends. 22 May 2017. Web. 23 October 2017.