Spotify

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Spotify Technology S.A.
Spotify Logo
Type of business Private
Available in 50+ languages, 20 languages (18 if excluding similar dialects) in desktop version
Founded April 23, 2006; 10 years ago (2006-04-23)[1]
Headquarters Stockholm, Sweden
London, England, U.K.
Country of origin Sweden
No. of locations 19[2]
Founder(s) Daniel Ek, Martin Lorentzon
CEO Daniel Ek
Industry Music
Services Music streaming
Employees 1,600+[3]
Website www.spotify.com
Alexa rank Increase 234 (August 2016)[4]
Registration Required
Users 100 million+
Launched October 7, 2008 (2008-10-07)
Current status Active
Native client(s) on Android, iOS, Windows, OS X, Windows Phone, Linux, Sony PlayStation 3 and PlayStation 4
Written in C++ (Desktop version; with some third-party libraries)[5]

Spotify is a Swedish music, podcast, and video streaming service that provides digital rights management–protected[6] content from record labels and media companies.[7] It is available in most of the Americas, Europe, and some countries in Asia and Oceania.[8] Music can be browsed or searched by artist, album, genre, playlist, and record label. Spotify was launched in September 2008 by Swedish startup Spotify AB. As of August 2016, Spotify had more than 100 million active users[9] and about half a billion registered users.[citation needed] As of September 2016, Spotify has 40 million paying subscribers worldwide,[10] up from 30 million paying subscribers in March 2016.[11] Spotify Technology S.A. operates as the parent company, registered in Luxembourg,[12] while Spotify AB handles research and development in Stockholm.[13]

As of August 2016, Spotify provides access to over 30 million songs, with more music being added approximately every day including albums, EPs, and singles.[14] Users can search for artists, albums, titles, labels and genres, and access songs from both major and independent labels. Some artists decided to opt out of Spotify.[7][15] Additionally, some artists withdrew from specific regions because of licensing restrictions. The desktop app allows music to be imported from iTunes,[16] while the main three apps (iOS, Android, and Desktop) allows downloading songs to listen to offline.[17] Users can download songs up to three devices with a song limit of 3,333 with a total track limit of 9,999 if the device song limit is reached on each device.[18][19] Users can create and share playlists,[20] or edit them together with other users by making that playlist a collaborative playlist.

Websites, blogs, and 3rd-party applications and tools support Spotify.[21] Community resources include Facebook, Twitter bots and user forums, and tools to display lyrics and services to list and notify users about new releases.[22] In 2010, Spotify's blog, The Pansentient League, held the first Spotify Community Site Awards, with categories such as Best Playlist Sharing Site, Best News & Music Finder Site, and Best Playlist Generator.[23] Spotify allows users to integrate their account with existing Facebook and Twitter accounts. Thereafter they are able to access their friends'/follower's favorite music and playlists.[24]

Spotify, together with the music streaming industry in general, faces some criticism from artists claiming they are not being fairly compensated for their work as downloaded music sales decline and music streaming increases. Unlike physical or download sales, which pay a fixed price per song or album, Spotify pays artists based on their "market share" (the number of streams for their songs as a proportion of total songs streamed on the service). They distribute approximately 70% to rights-holders, who will then pay artists based on their individual agreements. The variable, and some say inadequate, nature of this compensation,[25] has led to criticism. Spotify reports paying on average US$0.006 to US$0.008 per stream. In response, Spotify claims that they are benefiting the music business by migrating "them away from piracy and less monetised platforms and allowing them to generate far greater royalties than before" by encouraging users to use their paid service.[26][27]

Business model[edit]

Spotify operates under a freemium model (basic services are free, while additional features are offered via paid subscriptions). Spotify makes its revenues by selling premium streaming subscriptions to users and advertising placements to third parties. In December 2013, the company launched a new website, "Spotify for Artists", that revealed its business model and revenue data. Spotify pays copyright holders royalties for streamed music. The company pays 70% of its total revenue to rights holders. Spotify for Artists states that the company does not have a fixed per-play rate, instead considers factors such as the user's home country and the individual artist's royalty rate. Rights holders received an average per-play payout between $.006 and .0084.[28] The company has allegedly lost $200 million since it was founded, although the company has not confirmed or denied this.[29]

A 2012 report stated that Spotify posted a net loss of US$59 million in 2011, attributed to increased staffing costs and licensing fees and royalties to record companies.[30] A November 2012 report predicted that Spotify would reach revenues of US$500 million over the course of 2012, up from US$244 million in 2011.[31] As of 2013, Spotify offered an unlimited subscription package, close to the Open Music Model (OMM)—estimated economic equilibrium—for the recording industry. However, the incorporation of DRM diverges from the OMM and competitors such as iTunes and Amazon MP3 that have dropped DRM. Another income source was music purchases from within the app, but this was removed in January 2013.[32]

While Spotify does not automatically create preference-based playlists, it does integrate with Last.fm so people can "scrobble" the tracks they listen to onto the platform. Spotify includes a Radio feature for Spotify Free and Premium accounts. The radio feature creates a random playlist of songs chosen based on the specified genres and decades users choose. Users can also listen to podcasts and videos via the Spotify mobile apps if they are available in that user's' country.

Accounts and subscriptions[edit]

As of June 2016, the three Spotify subscription types are:

Type Free of ads Listening time Mobile Use HD audio Listen offline Cost in the UK Cost in the US Cost in Canada Cost in Europe (€)
Spotify Free No Unlimited[33] Shuffle only No No Free
Spotify Premium[note 1] Yes Unlimited Yes Yes Yes £9.99/month $9.99/month $9.99/month €9.99/month
Spotify Family[34][note 2] Yes Unlimited Yes Yes Yes £14.99/month $14.99/month $14.99/month €14.99/month
  1. ^ Premium subscription includes offline mode, enhanced sound quality, Spotify Connect, and allows mobile users to listen to the exact songs they want instead of being limited to "Shuffle" feature in playlists and full albums.
  2. ^ Includes up to six individual accounts.

Spotify encourages people to pay for music, with subscriptions as its main revenue source.[28] The subscription removes advertisements and limits, and increases the bitrate to 320 kbit/s for some songs.[35] The fee also allows unlimited mobile usage, as well as offline and online access to playlists. Spotify offers users free trials of Premium features for 30 days. Users must enter payment information and must explicitly terminate their subscription before the trial period ends to avoid paying for Premium features.[36] Spotify for Artists claims that "a Spotify Premium customer spends more per year compared to the average spend of a US music consumer who buys music (not including those who spend $0 on music)", with the annual value of the average US paying listener identified as US$120. The website also claims that "a Spotify customer is 1.6x more financially valuable than the average adult non-Spotify US music consumer."[28] BBC Music Week editor Tim Ingham wrote: "Unlike buying a CD or download, streaming is not a one-off payment. Hundreds of millions of streams of tracks are happening each and every day, which quickly multiplies the potential revenues on offer – and is a constant long-term source of income for artists."[37]

Advertisements[edit]

Spotify offers advertisers seven different types of ads, described in their Ad Specs as: Audio Ads, Display Ads, Billboard Ads, Homepage Takeovers, Branded Playlists, Lightbox and Advertiser Pages.[38] These advertisements vary in size, type and user engagement.[38] Audio Ads run for a maximum of 30 seconds as a commercial in between streamed tracks.[39] Display Ads, Billboard Ads, and Lightboxes appear during active and inactive use.[38] In February 2009, ads for non-paying users were 15 seconds long.[40] In May 2009, Neowin reported this had increased to approximately 30 seconds.[41]

Downloads[edit]

Spotify offered music downloads in the UK per track purchase in partnership with the 7digital music store.[42] The feature was designed to provide the option to download music.[43] In October 2010, Wired reported that Spotify was making more money for labels in Sweden than any other retailer, "online or off".[44] During 2010, Spotify paid more than €45 million to its licensors.[45] In January 2013, music downloads of tracks was removed from the app.[32]

Technical availability[edit]

As of May 2015, Spotify is available for Windows Phone, Android, BlackBerry, Boxee, iOS, Linux (now unsupported), MeeGo, Microsoft Windows desktop, Openpandora, OS X, Roku, S60 (Symbian), Samsung Smart TV, Sonos, HEOS by Denon,[46][47] PlayStation 4, PlayStation 3, Squeezebox, Telia Digital-tv, TiVo, WD TV, webOS;[48][49][50][51][52][53][54] It is not available as a Windows Store app for Windows 8 but rather as a full Windows desktop application. A third-party client, Spotlite, used to exist.[55][56]

Technical information[edit]

Spotify is proprietary and uses digital rights management (DRM). Users that agree to Spotify's terms and conditions agree to not reverse-engineer the application.[57] Streams are in the Vorbis format at q5 (ca. 160 kbit/s) for the Spotify free service,[58] or q9 (ca. 320 kbit/s)[59] for Spotify Premium subscribers. Spotify has a median playback latency of 265 ms or 390 ms without local cache.[60] Spotify does not offer CD quality (16/44.1 kHz) nor high-resolution audio (Hi-res, 24/96 or 24/192 or similar) services. As of version 0.4.3, it is possible to play locally stored MP3 and AAC files in addition to streaming. Spotify used to run Debian GNU/Linux on their servers, as they mentioned when they endorsed systemd in the Debian init/systemd debate,[61] but decided to switch to Ubuntu in July 2014, due to its more predictable release cycle.[62] Cache size and location are user configurable. 1 GB or more free disk space is recommended.[63] On OS X, a G4 processor or higher is required and users require an account to use the software. The same account can be used on several devices simultaneously with Spotify Premium, or one at a time, with Spotify Free, using Spotify Connect.[64]

Desktop[edit]

Client software is available for Microsoft Windows (XP, Vista, 7, 8 and 10) and Mac OS X 10.5 or newer. On Linux, either the Windows version can be used, using Wine,[65] or an unsupported preview of a native Linux version packaged for Debian 6.0 'Squeeze' and Ubuntu[66] and limited to AMD64 and i386 architectures. Version 0.8.8 received poor feedback.[67] Some features, such as playlist filtering, were removed while sorting was broken. The interface changed from native C++ to web-based. 0.8.8 and newer versions have slower performance and greater memory use.[68] As of July 2013 most complaints had not been resolved.[67] Spotify offers no option to turn off automatic updates; however, workarounds allow the use of pre-0.8.8 versions.[69][70][71] In December 2013, Spotify released a Premium client called "Spotiamp", which used an interface that resembles version 2 of the popular music player Winamp (AOL, the previous owners of Winamp before Radionomy, were planning to discontinue the player). The client contained an equaliser and support for Advanced Visualization System.[72] The client however can no longer be downloaded from the main website as it was taken offline.

Mobile versions[edit]

Avril Lavigne's "Smile" playing on Spotify for Android.

Mobile apps for Android,[73] iOS,[74][75][76] and Windows Phone 8.1/10[77] are available and actively supported. As of 20 June 2012, Spotify radio streaming was free on the iPad and iPhone in the US.[78] The applications allow Premium subscribers to access the full music catalogue, stream music and listen to music when disconnected. As of May 2014, "extreme quality" mobile streaming (~320kbit/s) is available on the iOS, Android and Windows Phone 8 versions of the Spotify app. As of December 2013, Spotify made its mobile app free for Android and iOS devices with ads enabled for free users. Premium subscribers do not get ads, as ads are disabled for premium subscribers.[79]

Geographic availability[edit]

Availability of Spotify in the world as of April 2016

Spotify is available in Europe, the Americas, Australia, New Zealand, limited Asian countries and territories that consist of Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, and Taiwan. The country list includes Andorra, Argentina, Austria, Belgium, Bolivia, Brazil, Bulgaria, Canada, Chile, Colombia, Costa Rica, Cyprus, the Czech Republic, Denmark, the Dominican Republic, Ecuador, El Salvador, Estonia, Finland, France, Germany, Greece, Guatemala, Honduras, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Monaco, the Netherlands, Nicaragua, Norway, Panama, Paraguay, Peru, Poland, Portugal, Spain, Slovakia, Sweden, Switzerland, Turkey, the United Kingdom, the United States and Uruguay.[80] In Estonia, Greece and Romania, the Premium service was offered until July 2009, but the free version was never offered. Only customers with credit cards or PayPal accounts in one of the above-mentioned countries can buy a Premium subscription.[81]

Spotify went live (by invitation only) in Scandinavia, the United Kingdom, France and Spain in October 2009.[82] On 10 February 2009, Spotify was launched in the United Kingdom.[83] On 18 May 2010, Spotify was launched in the Netherlands.[84] On 14 July 2011, Spotify was launched in the United States,[85] in Austria, Belgium, Switzerland on 16 November 2011,[86] in Germany on 13 March 2012,[87] and in Australia and New Zealand on 22 May 2012.[88] From 13 November 2012, it became available in Ireland and Luxembourg. From 11 February 2013, Spotify then became available in Italy, Poland and Portugal. Spotify was launched in Mexico, Hong Kong, Malaysia, Singapore, Estonia, Latvia, Lithuania and Iceland on 15/16 April 2013.[89][90]

On 24 September 2013, Spotify was launched in Argentina, Greece, Taiwan, and Turkey.[91] On 3 December 2013, Spotify was launched in Colombia as a pre-launch promo from Coca-Cola.[92] On 11 December 2013, Spotify was launched in Costa Rica.[93] On 12 December 2013, Spotify was launched in an additional 18 markets: Bolivia, Bulgaria, Chile, Cyprus, Czech Republic, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Hungary, Malta, Nicaragua, Panama, Paraguay, Peru, Slovakia and Uruguay.[94] On 8 April 2014, Spotify was launched in the Philippines.[95] On 28 May 2014, Spotify was launched in Brazil.[96] On 30 September 2014, Spotify was launched in Canada.[97] On 30 March 2016, Spotify was launched in Indonesia. On the same day, they also announced their partnership with Indonesian telecommunication and network provider Indosat Ooredoo.[98]

History[edit]

Daniel Ek addressing Spotify staff

Spotify was developed in 2006 by a team at Spotify AB, in Stockholm, Sweden. The company was founded by Daniel Ek, former CTO of Stardoll, and Martin Lorentzon, co-founder of TradeDoubler. The company's title, according to Daniel Ek, was initially misheard from a name shouted by Martin Lorentzon. Later they thought out an etymology of a combination of "spot" and "identify".[99]

Launch[edit]

Spotify's original logo (2008–2012)

The Spotify application was launched on 7 October 2008. While free accounts remained available by invitation to manage the growth of the service, the launch opened paid subscriptions to everyone. At the same time, Spotify AB announced licensing deals with major music labels.[100] The company reported a loss of 31.8 million kronor ($4.4 million) in 2008.[101] On 10 February 2009 Spotify opened free registration in the United Kingdom (UK).[102] Registrations surged following the release of the mobile service, leading Spotify to halt registration in the UK for part of 2009, returning to an invitation-only policy.[103]

Development[edit]

Former Spotify headquarters in Stockholm

On 4 March 2009, Spotify announced a security flaw in the service, by which private account information (including email addresses and hashed, salted passwords) of members registered prior to 19 December 2008 were potentially exposed.[104][105][106][107] Premium ecards (premium codes) were offered for the 2009 Christmas season that allowed recipients to upgrade an account to "Premium" status for 1, 3, 6 or 12 months.[108]

On 28 January 2010, Symantec's antivirus software marked Spotify as a Trojan horse, disabling the software across millions of computers.[109][110] In February 2010, Spotify received a small investment from Founders Fund, where board member Sean Parker was recruited to assist Spotify in "winning the labels over in the world's largest music market".[111] On 18 May 2010, Spotify announced that two more types of accounts were available: Spotify Unlimited, an equivalent to Spotify Premium without mobile and other features, and Spotify Open, a reduced-feature version of Spotify Free, which allowed users to listen to up to 20 hours of music per month.[112]

During 2010, Spotify paid more than €45 million to its licensors.[45] In March 2011, Spotify announced that it had one million paying subscribers across Europe,[113] doubling by September to two million.[114] On 1 September 2010, the World Economic Forum (WEF) announced the company as a Technology Pioneer for 2011.[115] On 25 March 2011, Spotify temporarily removed display advertising from external sources on its open and free accounts, due to an attack which used a Java exploit to place malicious code on victims' computers.[116]

Before their free mobile and unlimited offer, in most locations, a six-month free trial period was offered,[117] allowing the user to listen to an unlimited amount of music supported by visual and radio-style advertising.[118] After the trial period, Spotify had a listening limit of 10 hours per month, divided into 2.5-hour weekly portions (unused hours carried over).[119] The only locations exempt from this rule were Australia, Hong Kong, Malaysia, New Zealand, Singapore, and the U.S., where ad-supported unlimited streaming continued on Spotify Free.[120][121]

An "Unlimited" subscription removed advertisements and time limits, and a "Premium" subscription featured higher bitrate streaming and offline access. The app can be used without a premium account.[122] Users can try Spotify Premium for 48 hours by logging into Spotify Mobile for the first time, or getting a 30-day trial for their first month.[123] An active Facebook account was required to use Spotify if the user signed up via Facebook; but, as of 30 August 2012, the option to create a Spotify username was again offered.[124] Subscriptions required credit/debit cards or PayPal accounts registered in certain countries.[125][126] Alternatively, prepaid cards could be bought in retail stores in select countries.[127]

Monetisation[edit]

On 15 April 2011, Spotify announced via a blog post that they would drastically cut the amount of music that free members could access, effective 1 May 2011. The post stated that all Spotify Open and Spotify Free members would be transferred to a new product which limited audio streaming to 10 hours per month. In addition, individual tracks were limited to five plays. Spotify Unlimited and Spotify Premium members were not affected by this change. New users were exempt from these changes for six months.[128] On 17 June 2011, it was reported that Spotify had secured another US$100 million of funding and planned to use this to support its U.S. launch. The new round of funding valued the company at US$1 billion.[129]

U.S. launch[edit]

On 14 July 2011, Spotify launched its U.S. service, after delays and years of negotiation with the four major record companies.[130] On 30 November 2011, Spotify launched Spotify Apps and App Finder with launch partners that included Rolling Stone, We Are Hunted, Top10, Songkick, The Guardian, Soundrop and Last.fm.[131]

Spotify Apps[edit]

In November 2011, Spotify introduced a Spotify Apps service that made it possible for third-party developers to contribute HTML5 applications that could be hosted within the Spotify desktop player. The applications provided features such as synchronised lyrics, music reviews, and curated playlists. At launch, the supported applications included Billboard, Fuse, The Guardian, Last.fm, Moodagent, Pitchfork, Rolling Stone, Songkick, Soundrop, Tunewiki and We Are Hunted. In June 2012, Soundrop became the first Spotify app to attract major funding with a $3 million Series A of funding from Spotify investor Northzone.[132] The Spotify Apps service was discontinued in October 2014.[133]

2012–2016[edit]

On 29 March 2012, Spotify removed a restriction that limited non-U.S. free users to five plays of a given song; although the restriction continued in the UK and France. The 10-hour-per-month limit remained in place for all free accounts older than six months;[134] while the company also announced "continued unlimited free listening" for users in the U.S.[135] In August 2012, Time reported four million paid subscribers,[136] producing at least 20 million per month in revenue. A Goldman Sachs-led round of funding closed in November 2012, raising around US$100 million at a $3 billion valuation.[137]

On 19 March 2013, Spotify removed the 5-play restriction in the UK.[138] On 5 April 2013, Spotify released Messages and Browse as application updates. Messages could be sent to other users and viewed on the desktop application. Browse allowed users to find playlists and charts created by other users using filters such as genre, mood or activity.[139] On 16 April 2013, Spotify was launched in the Apple App Store, Google Play Store and Windows Phone Store in Singapore, Hong Kong, Malaysia,[140] Estonia, Latvia, Lithuania, Mexico and Iceland.[141] Upon its release in April 2013, the Daft Punk single, "Get Lucky", received the highest number of plays of any song in a single day.[142]

On 11 December 2013, Ek announced a free streaming feature for iPhone and Android users, allowing them to stream specific artists and playlists from their phones.[143] Previously, Spotify users were limited to listening to radio stations similar to artists or playlists. This feature allowed them to play shuffled tracks from a specific artist or playlist. The update also included new features for tablet users, enabling them to listen to any song at any time.[144] In its annual review, the streaming company revealed that 24 million active users streamed over 4.5 billion hours of music in 2013.[145][146]

On 6 March 2014, Spotify announced that they had acquired The Echo Nest,[147] which also supplied data to Spotify competitors. On 25 March 2014, Spotify launched an advertising campaign on Facebook, as well as its own application promoting Spotify Premium for Students, a discounted offer for its monthly subscription targeted to college students in the U.S.[148] In June 2014, Spotify released a new Web API that allowed third-party developers to integrate Spotify content in their own applications.[149] The Spotify Web API is a web service based on representational state transfer principles that can be accessed by programs through the Hypertext Transfer Protocol. It returns data about albums, artists, tracks, playlists and other Spotify resources in JSON format. To access some sensitive datasets (like user profile data), programs must provide OAuth access tokens with their requests.

On 28 January 2015, Sony Computer Entertainment announced that Spotify would power their new music service, called PlayStation Music.[150] The new service was launched on 30 March, and replaced the Music Unlimited service.[151] In April 2015, Spotify began raising another round of capital, attracting Goldman Sachs and an Abu Dhabi sovereign wealth fund.[152] This round of capital closed in June 2015, raises $526 million in a fundraising that values it at $8.53 billion.[153] In June 2015, Spotify acquired Seed Scientific, a data science consulting firm and analytics company.[154] Spotify announced Seed Scientific's team would lead an Advanced Analytics unit within the company focused on developing data services.

In January 2016, Spotify is raising another $500 million through convertible bonds.[155] In April 2016, co-founders Daniel Ek and Martin Lorentzon wrote an open letter to Swedish politicians demanding action in three areas that hinder the company's ability to recruit top talent: 1) access to housing 2) the education system and 3) stock options. In order to continue competing in a global economy, politicians must respond with new policies, wrote Ek and Lorentzon, or else thousands of Spotify jobs will be moved from Sweden to the U.S.[156] In April 2016 Spotify acquired CrowdAlbum, a company who is a photo-video aggregator, to help aggregate photos from concerts.[157]

Spotify will launch its Japan service beginning September 2016.[158]

Dispute with Apple Inc.[edit]

Starting in June 2016, Spotify and Apple Inc. entered a dispute about the Spotify app on iOS, Apple's mobile operating system. An update to the application would remove the option to start a subscription; in-app subscriptions on iOS must use Apple's billing system, which gives Apple 30% of all payments. Apple rejected the update, which would require users to visit Spotify's website to start a subscription, dropping Apple's system and therefore also reducing the monthly subscription cost for users. Spotify general counsel Horacio Gutierrez wrote a letter to Apple general counsel Bruce Sewell about the issue, in which Gutierrez wrote, "This latest episode raises serious concerns under both U.S. and EU competition law. It continues a troubling pattern of behavior by Apple to exclude and diminish the competitiveness of Spotify on iOS and as a rival to Apple Music, particularly when seen against the backdrop of Apple’s previous anticompetitive conduct aimed at Spotify … we cannot stand by as Apple uses the App Store approval process as a weapon to harm competitors."[159] Sewell responded to the letter, stating, "We find it troubling that you are asking for exemptions to the rules we apply to all developers, and are publicly resorting to rumors and half-truths about our service. There is nothing in Apple’s conduct that 'amounts to a violation of applicable antitrust laws.' Far from it. I would be happy to facilitate an expeditious review and approval of your app as soon as you provide us with something that is compliant with the App Store’s rules." Furthermore, Apple stated that Spotify is trying to ask for user emails with the intention of moving purchases online, which led to the update's rejection. All later updates will also be rejected until Spotify migrates to Apple's in-house in-app purchase system and removes their own system for purchasing a Premium subscription. [160] As of 21 September 2016, the dispute was resolved and updates are being released for Spotify on the platform again.[161]

Other developments[edit]

Streaming Records[edit]

In November 2015, Spotify announced that "Lean On" by Major Lazer and DJ Snake featuring was its most streamed song of all time with over 525 million streams worldwide.[162] It overtook "Thinking Out Loud" by Ed Sheeran, which had passed 500 million streams two months prior.[163] In April 2016, Rihanna overtook Justin Bieber to become the biggest artist on Spotify with 31.3 million monthly active listeners—a third of all Spotify users worldwide.[164]

User growth[edit]

In March 2011, Spotify announced a customer base of one million paying subscribers across Europe,[113] and by September, the number of paying subscribers had doubled to two million.[114] In August 2012 Time reported four million paying Spotify subscribers,[136] responsible for at least €20 million per month in revenue.[165] User growth continued, reaching 20 million active and 5 million paid users on 6 December 2012, including one million in the US.[166] Users reached 24 million (6 million paid) by March 2013,[167] 30 million (10 million paid) by May 2014,[168] 45 million (15 million paid) by January 2015,[169] more than 75 million active users (20 million paid) by June 2015,[170] and at least 30 million paid subscribers by March 2016.[11]

PlayStation Music[edit]

In January 2015, Spotify teamed up with Sony to power a new music service named PlayStation Music. The service is accessible to new and existing Spotify members via the PlayStation Network in 41 markets, on PlayStation 3, PlayStation 4 and Sony Xperia devices.[150]

Criticism[edit]

Spotify, together with the music streaming industry in general, faces some criticism from artists claiming they are being unfairly compensated for their work as downloaded music sales decline and music streaming increases. Unlike physical or download sales, which pay a fixed price per song or album, Spotify pays artists based on their "market share" (the number of streams for their songs as a proportion of total songs streamed on the service). They distribute approximately 70% to rights-holders, who will then pay artists based on their individual agreements. The variable, and some say inadequate, nature of this compensation,[171] has led to criticism. Spotify reports paying on average US$0.006 to US$0.008 per stream. Most notably, Radiohead's Thom Yorke and Taylor Swift's discography have been pulled from Spotify, with Swift claiming "I’m not willing to contribute my life’s work to an experiment that I don’t feel fairly compensates the writers, producers, artists, and creators of this music". Spotify is the first successful 'experiment' in music streaming. In response, Spotify claims that they are benefiting the music business by migrating "them away from piracy and less monetised platforms and allowing them to generate far greater royalties than before" by encouraging users to use their paid service.[172][173]

Explicit content filter[edit]

Spotify is one of the few music streaming services that do not allow users to filter explicit content, a restriction that may prevent users from opting into Spotify's Family Plan subscription offering.[174]

Artists[edit]

Spotify has been accused of failing to compensate artists fairly.[175] In a 2009 Guardian article, songwriter Helienne Lindvall said that for "artists who 'signed up to a label' there's a tangible risk that revenue which comes from a possible sale of shares by the label would end up in the proverbial 'blackbox' (non-attributable revenue that remains with the label)" and that "indie labels … as opposed to the majors and Merlin members, receive no advance, receive no minimum per stream and only get a 50% share of ad revenue on a pro-rata basis."[176] In 2009, Swedish musician Magnus Uggla pulled his music from the service, stating that after six months he had earned "what a mediocre busker could earn in a day".[177] Norwegian newspaper Dagbladet reported in 2009 that the record label Racing Junior earned only NOK 19 ($3.00 USD) after their artists had been streamed over 55,100 times.[178] According to an infographic by David McCandless, an artist on Spotify would need over four million streams per month to earn US$1,160.[179] Luke Lewis wrote that "the 'free' aspect of Spotify is unsustainable" and that "if Spotify is to have a future, it needs to be a viable business".[180]

In September 2011, US independent label Projekt Records stated, "We (the audience) believe in the value of what artists create. The artist's passion, dedication and expression is respected and rewarded. Spotify is NOT a service that does this. Projekt will not be part of this unprincipled concept."[181] In May 2012, British Theatre vocalist and Biffy Clyro touring guitarist, Mike Vennart, stated: "I'd sooner people stole my work than stream it from [Spotify]. They pay the artists virtually nothing. Literally pennies per month. Yet they make a killing. They've forced the sales way down in certain territories, which wouldn't be so bad if the bands actually got paid."[182] In March 2012, Patrick Carney of the Black Keys said that "Spotify isn't fair to artists"[183] and that "for a band that makes a living selling music, streaming services are not a 'feasible' option."[184] Replying to Spotify boardmember Sean Parker's claim that Spotify would make more money for the music industry than iTunes, Carney said: "That guy has $2 billion that he made from figuring out ways to steal royalties from artists, and that's the bottom line. You can't really trust anybody like that."[183] Singer David Byrne of Talking Heads criticised streaming services such as Spotify on 11 October 2013, writing: "If artists have to rely almost exclusively on the income from these services, they'll be out of work within a year." Byrne concluded his piece by admitting "I don't have an answer."[185]

In March 2014 American funk band Vulfpeck exposed a loophole in Spotify's royalty calculation model.[186] The band funded a concert tour using Spotify royalties from an album titled Sleepify, which consisted solely of silence. The band encouraged users to stream the album on a loop while they slept to increase the amount of money earned. The album was pulled by Spotify in April 2014, citing unspecified violations of the service's content guidelines. Vulfpeck had accumulated enough streams to result in at least US$20,000 in royalties before the album was pulled.[187][188][189][190] In March 2015 band founder, Jack Stratton, proposed a more equitable model for Spotify payout distribution in which each artist's payout is solely based on the revenue associated with that artist's listeners, and not the overall revenue.[191] In July 2015, Neil Young pulled almost all of his music off of Spotify and other streaming services, citing low sound quality as the primary reason. He stated that he didn't think his fans deserved the low quality they were receiving and said it was bad for his music.[192]

Radiohead[edit]

Radiohead singer Thom Yorke (front) and producer Nigel Godrich (rear) have accused Spotify of not supporting new artists fairly.

In July 2013, Radiohead singer Thom Yorke and producer Nigel Godrich removed their band Atoms for Peace and Yorke's solo music from Spotify.[193] In a series of tweets, Yorke stated: "Make no mistake, new artists you discover on Spotify will not get paid. Meanwhile shareholders will shortly be rolling in it. Simples … New artists get paid fuck all with this model." Godrich stated: "[Streaming] cannot work as a way of supporting new artists' work. Spotify and the like either have to address that fact and change the model for new releases or else all new music producers should be bold and vote with their feet."

In an October 2013 interview with Mexican website Sopitas, Yorke said: "I feel like as musicians we need to fight the Spotify thing. I feel that in some ways what's happening in the mainstream is the last gasp of the old industry. Once that does finally die, which it will, something else will happen."[194] Spotify responded in a statement that the company was "still in the early stages of a long-term project that's already having a hugely positive effect on artists and new music", and that they "are constantly talking to artists and managers about how Spotify can help build their careers".[195] In 2015, Brian Message, partner at Radiohead's management company Courtyard Management,[196] stated that he disagrees with Yorke, noting that Spotify pays 70 percent of its revenue back to the music industry.[197]

On 17 June 2016, Radiohead's ninth album, A Moon Shaped Pool, was made available on Spotify, six weeks after it was released on paid-for streaming services including Apple Music and Tidal. Spotify had been in "advanced discussions" with Radiohead’s management and label to make A Moon Shaped Pool the first album available exclusively to Spotify's paid subscribers, but the deal fell through. According to Spotify spokesman Jonathan Prince: “Some of the approaches we explored with Radiohead were new, and we ultimately decided that we couldn’t deliver on those approaches technologically in time for the album's release schedule."[198] In Rainbows (2007), the only other Radiohead album not previously available on Spotify, was added on 10 June 2016.[199]

Taylor Swift[edit]

On November 3, 2014, singer-songwriter and recording artist Taylor Swift's entire discography was removed from Spotify by Big Machine Records. Swift had previously delayed the streaming of her 2012 album, Red.[200] Spotify launched a social media campaign to persuade Swift to return and, in a statement on its website, claimed that 16 million of over 40 million users had played her music in the preceding 30-day period, but Swift did not change her stance on the situation stating, "I'm not willing to contribute my life's work to an experiment I don't feel fairly compensates [artists]." .[201]

In mid-November, Swift's label head, Scott Borchetta, disputed figures released by Spotify and Ek, which claimed that Swift would receive six million US dollars annually from the streaming site—Borchetta rejected Ek's statement in a Time magazine interview, in which he said that Swift was paid a total of $500,000 over the previous 12 months. Spotify responded to Borchetta, by claiming that Swift had been paid $2 million over the prior year. Spotify further explained: "We [Spotify] paid Taylor [Swift]’s label and publisher roughly half a million dollars in the month before she took her catalog down". Ben Popper, of the Verge publication, suggested that the $6-million figure was attained by taking Swift's "trend line" and extrapolating over a year-long period "to get to the highest possible number".[201][202] According to Borchetta, the amount Swift earned from streaming her videos on the Vevo site was greater than the payout she received from Spotify. He told Time: "The facts show that the music industry was much better off before Spotify hit these shores … Don’t forget this is for the most successful artist in music today. What about the rest of the artists out there struggling to make a career? Over the last year, what Spotify has paid is the equivalent of less than 50,000 albums sold."[203] Borchetta stated in a November 7 radio interview that he had been made aware of other artists who were seriously considering withdrawing. Borchetta's statements led to Ek were followed by a post in which he wrote that Spotify had paid $2 billion to labels and publishers since its inception in 2008, and was bolstering the music business financially.[203]

Borchetta clarified in a February 2015 interview that Swift's catalog would be permitted on a streaming service "that understands the different needs that we [Swift and Big Machine] have," whereby "the choice to be [on the free, ad-supported tier] or not" is provided. Borchetta argued that Swift's musical oeuvre is "arguably the most important current catalog there is" and stated that the streaming issue is "about each individual artist, and the real mission here is to bring … attention to it." He speaks on behalf of Taylor Swift's most extreme fans claiming, "If a fan purchases the record, and their friends go, 'Why did you pay? It's free on Spotify,' we're being completely disrespectful to the superfan."[204]

D. A. Wallach[edit]

In February 2012, musician D.A. Wallach—member of the band Chester French and former Harvard classmate of Mark Zuckerberg—was Spotify's "artist-in-residence," and helped form the "Artist Services" team. The group reportedly advises artists on how to enhance their use of Spotify and provides education about the platform. Wallach engaged with the media in 2012, informing the Forbes publication in February:

We’re working very carefully to make Spotify the most artist-friendly company that has ever existed … We want to help artists … Our goal is to make artists a lot of money, more money than they’ve ever been paid.[205]

In a June interview with the Hypebot site, Wallach reported that US$180 million of royalties was paid out in 2011 and 70% of Spotify's revenue consisted of royalty payments, meaning that the per-stream royalty rate doubled between the service's inception and mid-2012. He said that, at the time, the average listener spends US$60 annually on music, whereas Spotify Premium users spend twice that amount. According to Wallach in 2012: "The growth of the platform is proportional to the royalty pay out and since inception we’ve already doubled the effective per play rate."[206]

Withheld content[edit]

When an artist opts out of Spotify or is otherwise unavailable, Spotify displays a message reading: "The artist or their representatives have decided not to release this album on Spotify. We are working on it and hope they will change their mind soon."[207] In December 2015, Coldplay withheld A Head Full of Dreams from Spotify until one week after its release,[208] unlike their previous album, Ghost Stories[209] and Mylo Xyloto[210] which has longest period of their work being withheld for 4 months since the official release of the particular album.[211] Beyoncé's self-titled album was not available until November 24, 2014,[212] when the platinum edition was added.[213] The Black Keys' album Turn Blue remained unavailable.[207]

Adele's 21 was not initially available on Spotify, as Adele wanted Spotify to make her album available to paid subscribers only, but not to others. Spotify declined her offer to avoid creating separate catalogues for subscribers and non-subscribers.[214] The album became available to stream in June 2012.[215] However, with the release of the latest album, 25, singer confirmed that the album won't be available to be streamed anytime soon in any streaming services including Spotify, Apple Music, and Deezer.[216] However, the album was made available for streaming on June 2016. Several bands from the 1960s and 1970s delayed their work to being made it available on Spotify. Until the end of 2013, Led Zeppelin's music was not available. Late in 2013 the parties reached an agreement.[217] Later in 2015, AC/DC[218] and The Beatles[219] recently allows their work to stream in Spotify, along with Rdio and Apple Music. Icelandic singer Björk initially chose not to release her album Vulnicura on Spotify, saying: "This streaming thing just does not feel right. I don’t know why, but it just seems insane ... to work on something for two or three years and then just, 'Oh, here it is for free.' It's not about the money; it’s about respect, you know? Respect for the craft and the amount of work you put into it."[220]

Copyrights[edit]

In September 2013, Ministry of Sound sued Spotify, alleging that user playlists mimicking the track listings of their compilation albums were infringing on album copyrights.[221]

In the Spotify For Artists website launched in December 2013, the streaming service includes a section titled "Spotify's impact on piracy" as a response to the criticisms against the company regarding the exploitation of musicians. Spotify states that it has proven the theory 'given a free and legal alternative, people will pirate less', and uses Sweden, Norway, Denmark, USA, Netherlands and the UK to provide evidence. For example, in Norway, the figure of 1.2 billion unauthorized song downloads in 2008 is compared to a figure of 210 million from 2012.[28]

User privacy[edit]

In May 2014, Spotify announced it had been hacked but stated that it would take further actions to increase security. Spotify claimed that only one user's information might have been jeopardised, and released an update for Android users.[222] On August 21, 2015, Spotify changed its privacy policy. Users who lacked a privacy manager in their devices started leaving Spotify over those changes.[223]

Support[edit]

In June 2012, Charles Caldas, CEO of the Merlin Network, a representative body for over 10,000 independent labels, clarified that Spotify pays royalties to the music labels and not the artists. According to Caldas, the payments Merlin’s labels received from Spotify rose 250 percent from the year ending March 2011 to the year ending March 2012, while, at the time of the interview, the revenue per user (RPU) was "the highest it has been since the launch of the service." Caldas said that Merlin had observed "consistent, ongoing growth on revenue per user, revenue per stream, and the total revenue" that Spotify generates for the labels it represents.[206][224]

Caldas also highlighted the issue of time lag for artists, as they are not gaining an impression of Spotify's status at the time they receive their payments because they are "getting reporting quarterly, or six-monthly, on sales that happened six months ago." Caldas explained that "royalty statements could be a year old," which is an issue for Spotify, as it is ideally suited to long-term artists because the more times a purchased download is played, the less money the artist receives per play.[224]

In February 2015, the TechDirt site interpreted data from an Ernst & Young report that was compiled on behalf of the French record label trade group, SNEP, showing that major music labels were withholding royalties instead of streaming services like Spotify. The report looked only at the payouts of Spotify and Deezer, revealing that the music labels receive 73.1% of the total post-tax payout, while songwriters and publishers receive 16% and artists receive 10.9%. The writer concludes that, while labels formerly required large distribution fees to stock worldwide retail outlets, "there's no manufacturing, and distribution is an 'upload' button," and "it appears that perhaps they [artists] should be discussing things with the labels."[225]

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