Is Spotify the Ruler of All Streaming?

Marchaina Roscoe

Stephen Cirino

Digital Distribution Class

Is Spotify the Ruler of All Streaming?

Spotify is a digital streaming service that gives users access to music, podcasts and videos from different artists around the world. The company was founded by Daniel Ek and Martin Lorentzon in Stockholm, Sweden in 2006. They released their first public beta in Sweden in 2007 which eventually led to the launch of their notable shared playlist feature and access on Apple’s Mac computers. A year later, Spotify started to incorporate ads onto their platform and officially launched in Europe in 2008. The platform continually advanced as years progressed by launching apps onto mobile phones (iOS and android) in 2009 which helped gain one million paid subscribers by the Spring of 2011. In the same year, Spotify finally launched their platform in the United States by integrating with Facebook so people can see what their friends are listening to. With that addition, by the end of 2013, the platform had over 24 million active users streaming over 4.5 billion hours of music in just that year (Crook). From there, Spotify’s user base continued to grow rapidly thanks to their many advancements and unique features.

A major component of Spotify is their ability to introduce new music to their users. The more one listens to Spotify the more Spotify learns the type of music the user likes. As a user keeps their listening habits consistent, Spotify presents music to them in the future that relates to their tastes. One popular playlist the program has to offer is known as “Discover Weekly,” which is created every Monday based on what the user has been listening to so they can discover new music and new artists related to their taste (Willings). With their prominent playlists, users can keep up to date with the hottest tracks in the industry and can also listen to a setlist of music based on genre, artist, time of day, mood and more (McGarry). In addition, aside from the multiple workout playlists the platform offers, Spotify has “Spotify running” which is a feature that matches a song tempo to ones running pace (McGarry). This is helpful for runners so they can keep the same tempo while running and not be thrown off. Thanks to their integration with Facebook, users are able to discover music based on what friends and family are listening to as well (Willings). Users can also make collaborative playlists and give their friends access to add and delete songs to it. This feature is used to easily share one’s taste with others and it can be really helpful in situations such as road trips so everybody can chip in a song they want instead of one friend being the sole DJ. In addition, if a user doesn’t want people to see certain songs they’re listening to during their listening session, they can go into a private session so Facebook friends can’t see what they’re doing (Dashevsky).

Another unique feature Spotify provides that helps users easily share songs through mobile devices is Spotify codes. These codes helps artists market their songs easily because the link stays the same throughout and it’s an easy scan for people to go directly to the song (Willings). Spotify also allows users to share a song through the imessage app which gives the person a thirty second preview of the song in which they can then click in order to hear the entire record (Tanasychuk). The only disadvantage in that is that people have to have the app in order to listen to the song on their devices.

Users have the choice to subscribe to Spotify’s freemium option which will allow one to listen to music for free. The only main drawbacks in having freemium is that the listening experience will be coupled with advertisements and that there’ll be less access to all the features that the platform offers. In order to get ad free streaming, unlimited skips, extreme quality, spotify connect, and all the other features provided one would have to pay $9.99 per month for Spotify Premium. There is also a premium for family which gives six family members unique access to their own spotify account for $14.99 per month. However, everybody on the plan has to live at the same address (so sadly, people can’t sneak their friends into this deal). Spotify also offers a special discount for students at half of the original payment which would be $4.99 instead of $9.99 (Willings). Spotify is available in 59 countries and as of July 2017, Spotify has over 60 million paying subscribers and over 140 million active users. More than half the users listen to Spotify’s popular, updated playlists in order to listen to new music, with their “Today’s Top Hits” playlist having over 16 million subscribers (Knopper).

One major problem that Spotify (amongst other streaming services) has is their royalty distribution to recording artists. Over the past two years Spotify’s streaming revenue went from 1.8 billion to 3.8 billion, and yet, artists still aren’t satisfied with the amount of money they get paid (Knopper). Spotify pays royalties based off of the number of an artist’s streams. From there they claim to distribute 70% of revenue to the rights’ holders (keeping 30%) and pays each artist based off of their individual agreement. However, some sources state that Spotify only keeps 20% while others argue that they really take 50%, so the legitimate amount isn’t totally clear. As a whole, due to Spotify’s free ad subscriptions, they generate minimal revenue which leads to losses in revenue to give out to artists. In an article titled “Spotify Needs Fee Infusion” written by Jan Dawson, Dawson mentions that Youtube’s 2016 revenues from ad supported streams were four times more than Spotify’s. Based on that fact, she goes on to state that if Spotify took freemium away they would have more power over Youtube. The reason being because Youtube would be pressured to be more cordial to labels since they are the service that distributes the lowest royalties with ads. Overall, the drawback on low royalty payment causes Spotify to have a not so great relationship with artists and labels unlike their top competitor Apple Music (Dawson).

Apple decided to launch their music and video streaming app in the summer of 2015, which was about nine years after Spotify had already launched. By that time, Spotify already had 20 million paying users, 75 billion users total, and 3 billion dollars paid out to artists (Crook). Due to Apple’s late start, Spotify has more subscribers with tens of millions more paid users plus more with their freemium service which is a feature Apple doesn’t have. However, since their launch in 2015, Apple Music has already gained half the number of Spotify’s paid users (Staff). Both platforms cost $9.99 monthly with a family plan of $14.99, however, Apple Music doesn’t offer a freemium service with ads. The only time Apple Music offers users free streaming is during their three month free trial when they subscribe for the monthly payment (while Spotify only offers one month free). Although it’s not totally clear in how much, Apple Music has a bigger music library than Spotify with around 40 million songs in their catalog. In addition to that, they have an advantage over Spotify with the ability of integrating consumers’ itunes library so that anything they downloaded or burned from a CD before the platform launched is still able to integrate into the Apple Music library (spotify offers regulating local music files but it’s not as advanced as Apple).

Apple also signs exclusive deals with artists which gives them access to music that Spotify can’t get. Apple Music’s “connect function” gets fans and artists together by allowing the artist to post exclusive insight and information on what they’re working on. This feature also gives fans the opportunity to like, comment, and share an artist’s message as the artist can respond back. In addition, users with the new iOS 11 update can share listening habits to others in the platform. But unlike Spotify, the app still doesn’t show the number of followers a user has. Although Spotify took away the ability for their users to privately message each other through the app because of low usage, their social features are still more advanced than Apples. Apple Music is big for their advanced radio area called “Beats 1” which offers radio shows from DJs and other notable artists in the industry. Their radio feature also has a 24 hour radio station and news stations like BBC News and ESPN. Their radio app is a way for their users to discover new music and hear what notable artists like to listen to as well. However, in terms of music discovery, it’s easier for users to find new music through Spotify than in Apple Music. Playlists in Spotify are made based on the user’s individual taste and it allows users to create and share their playlists while following others. In contrast, Apple Music’s playlist selections come from individual DJ’s they pay that are considered “experts.” Spotify also has the playlist that’s tailored to running speed when working out while Apple only has normal workout playlists. Apple Music also has siri integrated so iPhone subscribers can use voice commands to choose what they want to hear. Spotify also has this feature when premium subscribers are paired with smart home systems like Amazon’s Echo speakers. Apple is starting to expand their service by integrating their platform with big speaker companies like Bose and Mcintosh while also integrating playback on Apple TV in the near future (Staff). With availability in over 110 countries, Apple Music is still behind Spotify with only 27 million subscribers as of June 2017 (Knopper). Although the numbers aren’t totally definite, like Spotify, Apple Music pays out 70% of their streaming royalties to Rights owners. Overall, based on the fact that Apple Music launched later than other streaming platforms, they are behind in the race for the best service. However, with their continuous advancements and new features they have a chance to catch up.

Another huge streaming platform that’s in competition with Spotify is Youtube. Youtube has been owned by Google since 2006 and is a video sharing website where one can listen to and watch music videos, vlogs, and more. Just like Spotify, this platform is a free service with ads that also offers a subscription known as “Youtube Red” for $9.99 that is ad free and includes more benefits. The benefits include the ability to download videos for offline viewing, to watch original shows exclusive to subscribers, and to be able to have full access to Google Play Music Unlimited. A unique feature on Youtube that Spotify doesn’t have is their live video feature. They have ultra low live streaming latency so there’s little delay between the users live stream and what the viewers see on the app. The platform also recently added a feature that gives users with an iPhone and more than 100 Youtube subscribers the ability to stream what they’re doing on their iPhone screen to viewers on the app. With Youtube being a service that’s used worldwide, the platform has over one billion hours of video watched on the site everyday. In contrast to Spotify having all of its features in one app, Youtube has a separate app for their music. This free app allows users to find stations based on previous videos they watched and it also learns people’s taste and creates personalized stations for them similar to Spotify (Keller). The only drawback in terms of Youtube is that users have to use more than one app in order to get everything they want. While in Spotify, there are also more than one hundred third party apps that users can use without exiting out of the platform which ranges from music review apps, song lyric apps, comedy and more (Dashevsky).

Compared to Spotify and the other competing platforms, Youtube pays the least amount of royalties out to artists. The RIAA calculated that Youtube pays $1.50 per 1000 views in U.S. CPM while other sources say $1.20 and the executive of Youtube argues that they pay $3. Although these numbers vary, the amount of streams to the amount paid out to artists is horrible. While Youtube is great for their videos and music, in order to gain more advantage and power towards other services, they would need to pay artists better before Taylor Swift decides to boycott them like she did Spotify.

Pandora Radio is known as one of the first companies out for streaming music. They are a music streaming and automated music recommendation service that was once known as solely a non-interactive service until March 2017 when they added their premium on demand option. They offer three different options for users to choose from in terms of subscription. The first being the freemium option with ads in which the user picks an artist and their radio station which’ll then play songs based on their style. The next one up is Pandora plus which is $4.99 per month or $54.89 per year. This option is ad free with unlimited skips, the ability to create personalized stations, higher quality audio, and the ability to listen to stations offline. The last option is Pandora premium which is $9.99 per month or $109.89 per year. This option includes all features from Pandora plus, but like Spotify, it gives users the ability to create playlists that can be shared with other premium members to play them (Caldwell). Premium also gives users unlimited skips and replays and also the ability to play or download the 40 plus million songs in their catalog. Out of all the payment plans, Pandora doesn’t have a family plan like Spotify, however, they do offer a one month free trial. Unlike Spotify, Pandora is only available in Australia, New Zealand and the U.S with only 81 million active users. Both Spotify and Pandora offer personalized suggestions based on what one previously listened to which allows users to discover new music within their taste. In contrast, Pandora allows users to add more similar songs to start a base on a playlist while Spotify only allows one song. Users on Spotify also have to manually add songs to their playlists while Pandora has an auto generate option. However, users aren’t yet able to edit their “up next” queue like others can on Spotify (Casey). In addition, Pandora only has a select amount of podcasts and doesn’t have videos like Spotify. While Pandora has the second highest amount of total users behind Spotify, according to digital music news, they are in second to last place with one of the worst artist payouts (Sanchez).

Compared to the other streaming platforms, Soundcloud is known as a platform for independent and DIY artists to make a name for themselves and get noticed. Launched in 2008, Soundcloud is a cloud service that lets users discover, download, and upload their own content whether it being music audio or podcasts. Just like Spotify, Soundcloud offers a free and premium service at the same price (except the platform has an extra subscription option for $4.99 and they don’t offer a family plan). Their free service includes ads, no offline listening and no preview lock while their Soundcloud Go options offer ad free listening, offline listening and more based on the extra subscription one has. Unlike Spotify, based on the subscription one is on, Soundcloud allows users to put a preview lock on their song so viewers can only hear the first 20 seconds or so of the track while only Go users get an exclusive listen of the full record (Sargent). Based on the fact that there are many more independent music makers on Soundcloud than Spotify, it’s easier for a user to find a song with little fame that matches their taste. In addition, with over 175 million active listeners, (while Spotify has around 140 million) artists have a wider audience to reach to get themselves noticed (Soundcloud). In that case, Soundcloud can be less authentic in terms of the calculation of the amount of plays an artist gets because artists can buy high-quality soundcloud plays in order to attract organic listeners. This is really helpful for artists that are trying to get their name on the map because Soundcloud ranks tracks based on the amount of plays, reposts, and comments. That being said, artists that don’t have much of an offline presence can still make themselves known if their track is a hit (which is rare for Spotify). Both platforms has a data analytic function so users can see statistics on how their songs are doing, see how many followers they have and more. Unlike Spotify, Soundcloud has instant messaging so users can interact with their followers and get more connected with others on the platform (Moton). Although Spotify is more advanced with their Spotify codes, both platforms have ways for users to share their music or audio through social media. In addition, like most streaming platforms, both have low royalty fees when paying artists. Overall Soundcloud is used for artists to build a fanbase and connect with their fans, while Spotify is used to give fans access to music which causes less of an artist to fan interaction.

In order to figure out which streaming services (out of the five above) are the most popular and why, I conducted a focus group that consisted of five college students who were all nineteen years old. I gave each of them a survey to fill out and advised them to go in as much detail as possible when answering the short answer questions. When I asked the first question, “Do you pay for a music streaming platform?” Two out of the five students said yes and when I asked them which platform they paid for, both of them said that it was Spotify (Figure 1 and 2 shown below). The following question was “which [music streaming platform] do you use the most?” Out of the five platforms listed, three students said Spotify while the other two said Youtube (Figure 3 shown below). I then added onto that question and asked them “what’s the best feature you like about that platform?” The three students that chose Spotify said they like it because they are able to download music and listen to it when they’re offline, because they’re able to make playlists, and because the platform lets them know when new music is out. One of the students that chose Youtube liked that they are able to play any song they want without paying. And the second student that chose Youtube went more in depth and said: “[I like] that it is free and I can both listen to songs and or watch a video to go with it (lyrics or music video). I also like the fact that YouTube recommends songs based off of your music history…it does a pretty decent job at that.” After asking them why they liked their chosen platform, I asked them “what makes you use that one aside from the other platforms listed?” The Spotify users said: the algorithm of suggested songs, familiarity, and the fact that they “just like it better,” while the Youtube users based their reasoning on the fact that the platform is easy to access and that it’s free. All of the students in the group said they streamed music everyday and when asked if there’s any other way they listen to music other than solely streaming, only one said they still listen to CD’s. Out of the three students that listened to Spotify all of them mentioned that it altered their music buying habits because they no longer have to pay for music because “why pay for music when [you] can listen to it for free?” One mentioned that they used to illegally download music all the time because it was a normal thing for them, but now that Spotify is in the picture they no longer have to do that. After that, each student listed all the ways they discovered new music which was by: word of mouth, Spotify, Soundcloud, Youtube’s autoplay, social media, ads, TV, movies, twitter, and instagram. Overall, the top platforms the students in the group enjoyed the most was Spotify and Youtube because of their free and discovery based features.

With the help of the small focus group and further research on all five platforms, it seems like Youtube and Spotify are the most recognized platforms. Spotify had a higher popularity within the group because it not only includes a free service, but it also helps consumers discover new music better than the others. Thanks to that, users don’t have to rely solely on their own research or word of mouth in order to find new music that they wouldn’t find as quickly on their own. Without Spotify’s notable playlists, the platform probably wouldn’t be as far as it is today. The platform integrates many apps within itself and provides a large amount of podcast, videos and music for those to enjoy. Once the platform finds out a better solution into how they should pay royalties out to artists with both sides still being satisfied, they’ll have a better chance of keeping their competition underneath and staying on top.

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