Spotify: The Streaming Behemoth

The music industry is an industry of change. Since the turn of the Twenty-first Century, the mediums in which people listened to music underwent a monumental change: Analog to Digital. Cassette tapes, vinyl, and CDs began to fade in popularity as mp3s and other digital files became popular. As technology continued to evolve, a new type of digital media emerged: Streaming. Streaming allowed users to listen to music without having to download or even purchase music. Streaming became the largest digital music medium and the leader in the industry is Spotify. This essay will explain how Spotify came to be the giant that it is today, its effect on the music industry, its competitors, and how it fairs with the college age demographic.

Spotify began development in 2006 by Spotify AB. According to Daniel Ek, a founder and the CEO of Spotify AB, the name came from a brainstorming session where he misheard and thought someone said Spotify. As an afterthought, they stated that it came from “spot” and “identify.” After two hard years of software development, Spotify finally launched as an invite-only service in 2008. They announced licensing deals with Universal Music Group, Sony BMG, EMI Music, Warner Music Group, The Orchard, and a few other independent distributors (Spotify). At this time the service could only archive and playback music stored locally unless the user subscribed to the premium model. With premium, users could listen to whatever music they could find in Spotify’s service. In 2009, Spotify was finally available to the public in very limited supply. It was only available for the United Kingdom. They launched their free service model that allowed users to listen for free at the cost of advertisements. In 2011, it was finally unleashed to the United States. They introduced a six month free trial to Spotify Premium to draw new listeners in. In addition, they also developed tools for other developers to run the Spotify streaming service through other applications. After the six month trial, free users could only listen to ten hours of music per month and could only listen to the same song five times a month (Flacy). As a result of this limitation, many people actually subscribed to Spotify Premium. After the success of the premium model, Spotify made unlimited listening available to the free users. In 2014, they developed a web API that allowed for web developers to integrate Spotify features into any website. Websites like Billboard.com could place a play button on their website that would immediately play the requested music in Spotify. Spotify continued to expand and capture an enormous consumer base.

Spotify is unique because it offers a “freemium” price. Users who subscribe to the premium model will have access to unlimited music streaming on the desktop and mobile clients (Spotify). Unlike online radio stations, users can choose exactly what they want to listen to. They can create their own playlists and listen other user playlists. All music is streamed over wifi or LTE, but for those who go without an internet connection temporarily, Spotify allows an unlimited amount of music to be stored locally for offline listening. In addition, the streaming quality is excellent, streaming at 320kbps. The free user does not have all the same luxuries though. While they still have unlimited access to the millions of songs available on the platform, users are required to watch or listen to several advertisements every three or four songs. Free users cannot make use of offline listening or high quality streaming. The bitrate for free users is reduced to 160 kbps, half the resolution of the premium users. Free users can utilize the services of desktop and mobile but are unable to choose exactly what to listen to on mobile. Free users get an algorithmic shuffle-like feature for mobile streaming. Spotify charges $9.99 per month for premium and offers a discounted $4.99 option for students. They also offer a family plan that costs $14.99 and allows five family members to access Spotify Premium.

Amid their success, Spotify has started a number of controversies. Each of these all come from the amount that Spotify pays the artist. While the rate changes periodically, depending on various factors, artists are generally paid a fixed rate of $0.0060 to $0.0086 per stream. To put this in perspective, taking the lowest possible pay rate ($0.006), if an artist gets one million plays, he/she would make only $6000 (Plaugic). Artists signed to labels will never see this full number, as their label will usually take a large chunk of the sales. This, in turn, caused several artists to become angry at Spotify for exploiting the artist. Some even pulled their music from Spotify, most notably, Taylor Swift. She explained her grievances with Spotify in a 2014 Wall Street Journal article:

Music is art, and art is important and rare. Important, rare things are valuable. Valuable things should be paid for. It’s my opinion that music should not be free, and my prediction is that individual artists and their labels will someday decide what an album’s price point is. I hope they don’t underestimate themselves or undervalue their art. (Swift.)

Despite all of this, Swift put all of her music back on Spotify in summer of 2017. Radiohead was another band that expressed its distaste in artist payments, yet, despite protests, put their music on the platform as well.

Currently, Spotify boasts over 140 million active users and 60 million subscribers. It has over 30 million songs in its library and over 2 billion user-generated playlists. They have payed out a total of $5 Billion to artists and rightsholders. Spotify, however, is not the only kid on the block. Like any healthy market, Spotify has its competitors:

Apple Music was Apple’s response to Spotify’s success. Apple music is priced exactly the same as Spotify, except Apple Music does not offer any sort of free service. Users must pay a monthly subscription. Apple Music subscribers have access to the entire iTunes library and can stream (or download for offline listening) as much as they want. The service is available on all major devices, even android. It lacks the social features and playlist sharing that Spotify has, but it has about 10 million more songs in its library. Apple Music is Spotify’s strongest competitor.

TIDAL is a subscription based platform that markets itself as the only hi-fi streaming service. For $9.99 per month, users get access to TIDAL’s entire library at 320kbps, just like Spotify. For $19.99 per month, users can listen to high fidelity recordings. The 24-bit resolution audio is streamed at 1411kbps. In layman’s terms, users can hear what the record sounded like right out of the studio without any audio compression. The struggle with this is that it only really appeals to the audiophiles of the world. Most people cannot hear the difference between lossy and lossless audio. TIDAL also has a much smaller library compared to Spotify.

Soundcloud is a free platform that offers subscriptions. Users can listen to the millions of user-generated content for free. For $4.99 a month, users can save music locally for offline listening and can listen ad-free. For $9.99, users can listen to everything in addition to the premium content. The premium content are usually major label and independent label releases. Soundcloud Go+ does not have as large a library as Spotify. Soundcloud is heavily reliant on user-generated content, so most of the music is not professionally created.

Pandora is a streaming service with a heavy focus on radio. For free users, music can be streamed through algorithmically decided radio stations. Free users will have to listen to ads every several songs. For $4.99 a month, users can subscribe to Pandora Plus which allows users to listen to four stations offline as well as have an unlimited number of customized radio stations. For $9.99 a month, users can subscribe to Pandora Premium to get full offline capabilities. They can even choose whatever song they want to listen to. Pandora lacks social features that Spotify has.

Deezer is a streaming service like Spotify. It is almost exactly like Spotify. Free users can listen to an unlimited amount of music. They can listen to whatever they want on desktop and are limited to shuffle play on mobile. For $9.99 a month, users can listen to whatever they want ad-free. There is even offline listening available. Deezer also offers a family model for $14.99 a month. Unlike Spotify, users can setup a kid-friendly filter on Deezer’s family plan. Deezer lacks Spotify’s intuitive social features.

To evaluate how streaming has impacted the listener’s daily life, I interviewed ten students on their music consumption habits. The students asked to remain anonymous, so in any instance where one may need to be referred to individually, I will refer to them as Student 1, Student 2, Student 3, etc. I asked the following questions:

Do you stream music on a regular basis? The answer was universal, yet unsurprising. Every one of them gave a resounding yes. According to data supplied by the IFPI Global Music Report, streaming revenue went up by 60.4% in 2017 (IFPI). These are staggering numbers and definitely align with this focus group.

Do you pay for a streaming service? Nine out of ten students said that they did. Student 4 commented, “$10 per month is really attractive to the stereotypical broke college student.” The price is certainly appealing. $10 is not even enough to purchase a major album release on iTunes, yet it allows access to millions of songs. This customer first pricing style is probably a big contributor to the large increase in streaming revenue. After all, what’s a measly ten dollars a month? Student 6 was the only one who did not pay for streaming. When I asked why he responded that he “doesn’t pay for music.”

What is your prefered streaming service? Eight out of ten said they prefer Spotify. Student 1 stated that he likes the curated playlists that spotify offers. Student 10 said that the graphical user interface makes navigating the application easy. Student 3 says that it helps him discover new music that he really enjoys. The other two, students 5 and 9, prefered Apple music. They both said that they like that it’s all contained in the iTunes app on their phones. This result was also very unsurprising. Spotify has over 140 active users and apple music only has about 20 million subscribers (Heisler).

Do you stream more on desktop or mobile? This was another universal answer. Everyone listened more on mobile. Student 2 explained why he uses mobile the most. “I’m always running around a lot. Like, I don’t have time to sit down with a bulky computer and whatnot. My phone is always with me and so is my music.” With technology moving so fast, everything is now conveniently in our pockets. Desktop streaming seems to be the secondhand product.

How often do you buy music? The results here were mixed, but somewhere around occasionally. Student 10 stated that everything is on spotify that he listens to but he buys music when it helps small artists. Student 5 says that he always buys music made by the people he knows but uses Apple Music for the rest. Student 6 boldly reiterated “I don’t pay for music.” Besides the piracy problem that student 6 clearly displays with pride, the IFPI Global Music Report 2017 mirrors this decline in sales. It reported that Download Revenue was at a 20.5% loss (IFPI). It is clear from these interviews that the younger generation is a culprit of this.

In conclusion, Spotify is the leader in music streaming services and for good reason. They offer the customer a great deal. From lossy quality audio stream from mobile and desktop, to the ability to play download music for offline listening, the user gets a lot out of $9.99 a month. The curated playlists and well implemented social interactivity really set it apart from the competitors and allow for users to discover new music easily. Though Spotify created some controversy about artist and rightsholder revenue, the music industry has a history of changing rapidly, for better or for worse. They were one of the first streaming subscription services and they do it better than any other platform today. The streaming age is now and the numbers show it. As long as they continue to give the user what they want and continue to innovate, Spotify will be the music streaming leader for years to come.

Sources: hyperurl.co/3ycjvk

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