Most of the companies, any kind of companies, are claiming that success goes from the desire and the purpose to satisfy deeply their clients. It seems that the new economy is again challenging this fact…as they have to be also careful to those who are making their platform successful. Well, in reality, all the AirBnB or other Uber, they exist because of an efficient rounde3d eco system. Spotify is learning at the moment.
For the first time since a couple of decades, music executives are expressing an emotion long forgotten – optimism. That’s because the music industry recently saw its first gains. This can almost entirely be attributed to the rise of streaming apps like Spotify. According to the Recording Industry Association of America, music revenue increased by 16,5% in 2017, with music streaming services representing 70% of overall revenue. But we have to be slightly careful. The industry isn’t simply reverting to its pre-2000 what the labels would consider the golden age. The subscription-based approach that’s been adopted by most streaming services has not only led to a change in music consumption habits, but it’s also impacted how music is produced and distributed.
Case in point: while industry revenue is on the rise, songwriters are feeling the squeeze. A famous case is the story of Andre Lindal, a songwriter who composed “As Long as You Love Me,” a pop song that was performed by Justin Bieber and subsequently hit №3 on Billboard’s Top 40 rankings. Streaming numbers were Lindal’s friends that year, at least until he got paid. When he did, he found that the 34 million YouTube views had earned him $218, and the 38 million Pandora streams had netted him only $278. He then decided to stop his long-time songwriting career and started a firm that develops artists as musicians and brands, which he called “a necessity, given what the songwriter income is.” It turns out that royalty rates for songwriters were established in the beginning of the last century, back when the radio was still a burgeoning medium and long before the establishment of the current music landscape. While 75 cents of every dollar Spotify generates goes to music royalties, a small portion of this flows toward the songwriters themselves. This means that songwriters are only 90$ for 1 million streams on Spotify. That is fairly impossible to run a career. Streaming apps are also changing how new music is discovered. For several decades, whether a song became a hit was almost entirely dependent on it being discovered and played by radios. But with the consolidation of radio station ownership came the homogenization of radio playlists. Once-independent DJs who had been accustomed to choosing their own song lineups were given corporate-approved titles to play instead. Playlist song overlap between stations owned by the same company is as high as 76%. The golden years are definitely gone.
Spotify wants to claim they are changing and they really try to have a balanced eco-system. “We’re not just a streaming music company anymore,” said CEO Daniel Ek, who envisioned Spotify more as a two-sided marketplace serving both creators and fans than as simply a uni-directional consumption platform. “We’re building a vibrant ecosystem, creating new opportunities in both micro & macro markets globally, for artists at any level of fame … this puts us on a growth trajectory of generational proportions.” Part of this growth will involve extending Spotify’s visibility into both offline and non-audio real estate. For instance, CMO Seth Farbman described RapCaviar not just as a playlist, but as “a virtual gathering place for the global hip-hop community” and “a lifestyle brand with video content, live experiences and a targeted marketing plan.” But Spotify’s chief R&D officer Gustav Söderström revealed an even more compelling tenet of the service’s growth strategy, one that draws inspiration from the likes of Uber, Google and Tesla in its ambitions to dominate the personalization market: “self-driving music.” It is just a flashy substitution for “automated” and “context-aware”: using advanced, always-on data analysis to mold the discovery experience autonomously to an individual user’s tastes and behavior, across multiple devices and environments. Indeed, the amount of data Spotify collects on both ends of its “two-sided marketplace” is significant. On one end, there are now over three million artists on the service who release 20,000 new pieces of content every day on average. On the other end, the typical Spotify user clocks in 49 minutes a day on the service, increasing to 80 minutes for Premium users; multiply this by 159 million monthly active users across 65 markets, and that engagement generates three billion music-related events every day, including an average of over 330 million daily “discoveries” (i.e. listening to a certain track or artist for the very first time). In total, Spotify works with over 200 petabytes of data behind the scenes – incredible amount of data— to develop a superior personalization product.
Beyond this music strategy at large will be a platform approach that meets users where they are already active. According to its investor deck, not only does Spotify currently have over 250 integration partners, but 75 percent of Premium subscribers also use the service across multiple devices, and those who use Spotify on more than one device demonstrate lower churn and higher lifetime value for the company. But will a “self-driving” music discovery mechanism really serve the artist community, in terms of connecting meaningfully with fans? In the past, artists have expressed fear and criticism of Spotify’s over-quantification and productization of users’ listening habits, creating a different sort of gatekeeping mechanism in the industry; writer Liz Pelly described this phenomenon as “the automation of selling out.”
There is a concern is the accelerating growth of mood-driven, lean-back listening experiences over artist-focused ones. A recent survey found that Spotify’s context-driven playlists (i.e. those defined around a specific activity, such as running, or around a time-specific event, such as Women’s History Month) have significantly higher median follower counts than content-driven playlists (those focused more on specific genres, languages or geographies). Year-over-year follower gain for context-based playlists also outpaced content-driven ones at 84.6 percent versus 62.3 percent, respectively. “Self-driving music” sounds like the most extreme case of a context-driven music industry: one where lean-back consumers and tech platforms dictate the journey, while artists and rights holders sit shotgun but have little control over the steering wheel.
According to head of creator marketplace Charlie Hellman, Spotify has seen a 28 percent growth in the number of artists it considers “top-tier,” from 16,000 to 22,000 artists, and strives to continue expanding this cohort into the “hundreds of thousands.”
There have been several cases in which a previously unknown artist has been catapulted onto the Billboard charts after getting prime placement on one of them. This has led to more song diversity among the top hits. An engineer named Michael Tauberg performed an analysis comparing the Billboard charts in the eight years leading up to the launch of Spotify to the eight subsequent years. “In the pre-Spotify era of the 2000s, there were a total of only 3,092 songs on the Hot-100“. In the same amount of time from 2009–2018, there were 3,933 songs on the chart, an increase of 27%.” Songs spent less time, on average, on the list, but that meant more artists had a shot at breaking out into the mainstream. Of course, this hasn’t eliminated all problems pertaining to music diversity. Because a song needs to make it onto multiple influential playlists in order to achieve virality, songwriters are composing songs that can fit within several categories at once, a trend that some would argue leads to bland compositions that don’t take chances or break out of already-established genres.
So yes, the music industry is on the upswing, but this renaissance brings with it a paradigm shift for how music gets made and how the consumers discover it. Streaming just may well save the music business, but it’s important to stay mindful of those who, without the proper interventions, could end up getting left behind.