Spotify

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Spotify
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)
Headquarters Stockholm, Sweden
London, England, UK
Country of origin Sweden
No. of locations 20
Owner Spotify Technology S.A.
Founder(s) Daniel Ek, Martin Lorentzon
CEO Daniel Ek
Industry Music, podcast, and video
Services Music streaming
Employees 1,600+
Website www.spotify.com
Alexa rank Increase 216 (November 2016)[1]
Registration Required
Users 100 million (40 million paying)
Launched October 7, 2008 (2008-10-07)
Native client(s) on Android, iOS, Windows and macOS

Spotify is a Swedish music, podcast, and video streaming service, launched in October 2008 by startup Spotify AB,[2] that provides digital rights management–protected content from record labels and media companies. It is available in most of Europe, the Americas, Australia, New Zealand, and limited Asian countries and territories.

Spotify has apps available for most modern devices, including Microsoft Windows and Apple macOS computers, Android and iOS smartphones and tablets,[3] and has "Spotify Connect" streaming functionality that lets users listen to music through a range of entertainment systems.[4] Music can be browsed or searched by artist, album, genre, playlist, and record label. Users can create, edit and share playlists, as well as share tracks on social networks, and make collaborative playlists with other users.

Spotify provides access to over 30 million songs, with more music being added every day.[5] As of June 2016, Spotify has 100 million monthly active users,[6] and as of September 2016, it has 40 million paying subscribers.[7]

Spotify, together with the music streaming industry in general, faces some criticism from artists and producers claiming they are being unfairly compensated for their work as downloaded music sales decline and music streaming increases.[8] 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% of total revenue to rights-holders, who will then pay artists based on their individual agreements.[9]

The variable, and some say unsustainable,[10] nature of this compensation, has led to criticism. 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".[11]

In response, Spotify claims that they are benefiting the music business by migrating "them away from piracy and less monetized platforms and allowing them to generate far greater royalties than before" by offering a free, ad-supported service tier, and then encouraging users to opt in to the paid subscription.[9]

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 gets its content from major record labels as well as independent artists, and 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.[9]

Spotify offers an unlimited subscription package, close to the Open Music Model (OMM)—estimated economic equilibrium—for the recording industry. However, the incorporation of digital rights management (DRM) protection[12] diverges from the OMM and competitors such as iTunes and Amazon Music that have dropped DRM.[citation needed]

Spotify encourages people to pay for music, with subscriptions as its main revenue source.[9] The subscription removes advertisements and limits, and increases song bitrates to 320 kbit/s.[13]

Spotify for Artists claims that “a Spotify Premium customer spends 1.6x 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 $120. The website also claims that "a Spotify customer is 1.6x more financially valuable than the average adult non-Spotify US music consumer."[9]

Additionally, the Spotify for Artists website 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 United Kingdom 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.[9]

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."[14]

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[15] 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[16][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.

Monetization[edit]

Ever since launch, the company has been unable to turn a profit. In 2008, just after launch, it had a loss of 31.8 million Swedish kronor ($4.4 million).[17]

In October 2010, Wired reported that Spotify was making more money for labels in Sweden than any other retailer, "online or off".[18]

Years after growth and expansion, a November 2012 report suggested strong momentum for the company. In 2011, it reported nearly $60 million net loss from revenue of $244 million, while it was expected to generate a net loss of $40 million from revenue of $500 million in 2012.[19]

Another income source was music purchases from within the app, but this was removed in January 2013.[20]

Funding[edit]

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".[21]

In June 2011, Spotify secured $100 million of funding and planned to use this to support its U.S. launch. The new round of funding valued the company at $1 billion.[22]

A Goldman Sachs-led round of funding closed in November 2012, raising around $100 million at a $3 billion valuation.[23]

In April 2015, Spotify began another round of fundraising, with a report from The Wall Street Journal stating it was seeking $400 million, which would value the company at $8.4 billion.[24] The financing was closed in June 2015, with Spotify raising $526 million, at a value of $8.53 billion.[25]

In January 2016, Spotify raised another $500 million through convertible bonds.[26]

In March 2016, Spotify raised $1 billion in debt financing.[27]

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, Lightboxes and Advertiser Pages. These advertisements vary in size, type and user engagement.[28]

  • Audio Ads "play your audio commercial between songs" with a maximum duration of 30 seconds.[29]
  • Display Ads are "images displayed for 30 seconds for users to click on". "Leaderboard" display ads are at the bottom of the Spotify client, while "Skyscraper" display ads are on the right-hand side.[30]
  • Billboard Ads are "large "screen saver" images, displayed after 5 minutes of user inactivity. When the user returns, the billboard remains for 2 seconds then minimizes to a leaderboard or skyscraper for users to click on".[31]
  • Homepage Takeovers are "a combination of full-size background skin and optional interactive area that takes over the Spotify homepage".[32]
  • Branded Playlists are "playlists that contain a branded cover art image and text", and "must be user generated, have only one song per artist, and must have a minimum of 40 tracks due to policy restrictions".[33]
  • Lightboxes are "overlay windows that open up within Spotify", that can "contain nearly anything; image galleries, flash videos, games, interactive competitions, live streaming, and more".[34]
  • Avertiser Pages are "ad-served microsites, seamlessly integrated into the Spotify player", that can "contain any content you'd display on a webpage, including videos, clickable images, blogs, news, links, comments and more".[35]

Downloads[edit]

Starting in March 2009, Spotify offered music downloads in the United Kingdom, France, and Spain. Users could purchase each track from Spotify, which partnered with 7digital to incorporate the feature.[36] However, music downloads of tracks was removed from the app in January 2013.[20]

Device availability[edit]

The Chainsmokers' "Closer" playing on Spotify for Android.

Spotify has apps available for Microsoft Windows and Apple macOS computers, Android and iOS smartphones and tablets,[3] and has "Spotify Connect" streaming functionality that lets users listen to music through a range of entertainment systems, including speakers, receivers, TVs, cars, and smartwatches.[4] Spotify also features a web player, for those who are unable to - or do not want to - download the application.[37] Contrary to the apps, the web player does not have the ability to download music for offline listening.

Technical information[edit]

Spotify is proprietary and uses digital rights management (DRM).[12] Users that agree to Spotify's terms and conditions agree to not reverse-engineer the application.[38]

Streams are in the Ogg Vorbis format at 96 kbit/s for "Normal" quality on mobile, 160 kbit/s for "High" quality on mobile and standard quality on PC and the web player, and 320 kbit/s for "Extreme" quality on mobile and high quality on PC. The "Extreme" quality is only available for users who are Premium members.[39] "Extreme" quality is not available for use in Spotify's web player.

Spotify has a median playback latency of 265 ms (including local cache).[40]

Geographic availability[edit]

Availability of Spotify in the world as of October 2016

Spotify is available in most of Europe, the Americas, Australia, New Zealand, and limited Asian countries and territories.

The country list includes Andorra, Argentina, Australia, Austria, Belgium, Bolivia, Brazil, Bulgaria, Canada, China, Chile, Colombia, Costa Rica, Cyprus, the Czech Republic, Denmark, the Dominican Republic, Ecuador, El Salvador, Estonia, Finland, France, Germany, Greece, Guatemala, Honduras, Hong Kong, Hungary, Iceland, Indonesia, Ireland, Italy, Japan, Latvia, Liechtenstein, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Monaco, the Netherlands, New Zealand, Nicaragua, Norway, Panama, Paraguay, Peru, the Philippines, Poland, Portugal, Singapore, Spain, Slovakia, Sweden, Switzerland, Taiwan, Turkey, the United Kingdom, the United States and Uruguay.[41]

History of expansion[edit]

Spotify went live (by invitation only) in Scandinavia, the United Kingdom, France and Spain in October 2008.[42] Spotify launched in the United Kingdom in February 2009.[43]

It launched in the Netherlands in May 2010,[44] in the United States in July 2011,[45][46] in Austria, Belgium, and Switzerland in November 2011,[47] followed by Germany in March 2012,[48] Australia and New Zealand in May 2012,[49]and Ireland[50] and Luxembourg in November 2012.[51]

The expansion continued with Italy, Poland, and Portugal in February 2013,[52] Mexico, Hong Kong, Malaysia, Singapore, Estonia, Latvia, Lithuania, and Iceland in April 2013,[53][54] Argentina, Greece, Taiwan, and Turkey in September 2013,[55][56] and in an additional 20 markets (Hungary, Czech Republic, Malta, Bulgaria, Slovakia, Cyprus, Chile, Colombia, Uruguay, El Salvador, Paraguay, Honduras, Panama, Nicaragua, Peru, Ecuador, Dominican Republic, Guatemala, Costa Rica, and Bolivia) in December 2013.[57][58]

2014 saw the service launch in the Philippines in April,[59] Brazil in May,[60] and Canada in September.[61]

In 2016, Spotify launched in Indonesia in March,[62] and in Japan in September.[63]

History[edit]

Early development[edit]

Daniel Ek addressing Spotify staff

Spotify was developed in 2006[64] 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".[65] Spotify Sweden AB, headquartered in Stockholm, Sweden, handles research and development.[66] The company is a subsidiary of Spotify LTD, a company headquartered in London, United Kingdom,[67] which in turn is a subsidiary of Spotify Technology SA, headquartered in Luxembourg.[68] Spotify has offices in 20 countries as of November 2016.[69]

Launch in 2008[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.[2]

2009-2010[edit]

Former Spotify headquarters in Stockholm

In February 2009, Spotify opened public registration for the free service tier in the United Kingdom.[70]

Registrations surged following the release of the mobile service, leading Spotify to halt registration for the free service in September, returning the UK to an invitation-only policy.[71]

In March 2009, Spotify announced a security flaw in the service, by which private account information of members registered prior to 19 December 2008 were potentially exposed.[72][73]

Premium cards were offered for the 2009 Christmas season that allowed recipients to upgrade an account to "Premium" status for 1, 3, 6 or 12 months.[74]

2011-2012[edit]

In May 2010, Spotify announced that two more types of accounts were available: Spotify Unlimited, an equivalent to Spotify Premium without mobile, and Spotify Open, a reduced-feature version of Spotify Free, which allowed users to listen to up to 20 hours of music per month.[75]

During 2010, Spotify paid more than €45 million to rights-holders.[76]

In September 2010, the World Economic Forum (WEF) announced the company as a Technology Pioneer for 2011.[77]

In March 2011, Spotify temporarily removed display advertising from third-party sources on its computer software, after reports from users that the software was being flagged by anti-virus programs. PC Pro reported that "web monitoring firm NetCraft said the attack used a Java exploit to slip malicous code onto a user's computer".[78]

In 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.[79]

For the service's launch in the United States in July 2011, Spotify had a six-month free ad-supported trial period, where new users could listen to an unlimited amount of music. In January 2012, the free trial started expiring, with users limited to ten hours each month and five song replays.[80]

In November 2011, Spotify introduced a Spotify Apps service that made it possible for third-party developers to design applications that could be hosted within the Spotify computer software. The applications provided features such as synchronized lyrics, music reviews, and song recommendations.[81][82] In June 2012, Soundrop became the first Spotify app to attract major funding, receiving $3 million from Spotify investor Northzone.[83][84]

In March 2012, Spotify announced that all limits on the free service tier were dropped indefinitely.[85]

In April 2012, Spotify introduced the "Spotify Play Button"; an embeddable music player that can be added to blogs, websites, or social media profiles, that lets visitors listen to a specific song, playlist or album without leaving the page.[86][87]

In November 2012, Spotify began rolling out a new web-player. The web application, which "looks a lot like its desktop counterparts on Mac and Windows", would not require the installation of any app.[37]

In December 2012, Spotify introduced a new "Follow" tab and a new "Discover" tab. "Follow" lets users follow artists and friends to see what they are listening to, while "Discover" gives users new releases from their favorite artists, as well as music, review, and concert recommendations based on listening history.[88] The features were announced by CEO Daniel Ek at a press conference, with Ek stating that a common user complaint about the service was that "Spotify is great when you know what music you want to listen to, but not when you don't", adding that "20,000" new songs got added to the service on a daily basis. "You're fighting with 20 million songs on Spotify", Ek stated.[89]

2013-2014[edit]

In March 2013, Spotify removed the 5-play restriction for free users in the UK.[90]

In December 2013, CEO Daniel Ek announced that Android and iOS smartphone users with the free service tier could listen to music in Shuffle mode; streaming music by specific artists and streaming playlists without being able to pick which songs to hear. Mobile listening previously was not allowed in Spotify Free accounts. "We're giving people the best free music experience in the history of the smartphone", Ek commented.[91]

In March 2014, Spotify announced that it had acquired The Echo Nest, a music intelligence company that has "in depth musical understanding and tools for curation to drive music discovery for millions of users around the globe".[92][93]

Later in March 2014, Spotify introduced a new, discounted Premium subscription tier for active students. Students in the U.S. that were enrolled in a university only had to pay half price for a Spotify Premium subscription.[94]

In April 2014, Spotify moved away from the Peer to peer (P2P) system they had used to distribute music to users. Previously, a desktop user would listen to music from one of three sources: a cached file on the computer, one of Spotify’s servers, or from other subscribers through the P2P system. P2P is a well-established Internet distribution system, an alternative that reduced server resources and costs. However, Spotify ended the P2P setup in 2014, with Spotify's Alison Bonny telling TorrentFreak: "We’re gradually phasing out the use of our desktop P2P technology which has helped our users enjoy their music both speedily and seamlessly. We’re now at a stage where we can power music delivery through our growing number of servers and ensure our users continue to receive a best-in-class service."[95]

In June 2014, Spotify released a new Web API that allowed third-party developers to integrate Spotify content in their own web applications.[96]

In October 2014, Spotify discontinued its Spotify Apps functionality, stating that its new APIs for the Spotify web player fullfilled many of the advantages of the former Spotify Apps service, but "would ensure the Spotify platform remained relevant and easy to develop on, as well as enabling you to build innovative and engaging music experiences".[97][98]

2015-2016[edit]

In May 2015, Spotify announced multiple significant updates to the service. A new Home start page would serve up the "right music day and night" with playlists and music recommendations improving over time; "Spotify Running", a new feature aimed at a greater music experience while running, as "Spotify will detect your tempo, matching the perfect music in time to your step"; a new partnership with Nike that brought the Spotify Running experience to the Nike+ app, as well as integration with the RunKeeper app coming "later this year"; and podcasts and videos ("entertainment, news and clips") support would be coming to the Spotify platform, along with "Spotify Originals" content. "We’re bringing you a deeper, richer, more immersive Spotify experience", commented CEO Daniel Ek.[99][100]

In June 2015, Spotify acquired Seed Scientific, a data science consulting firm and analytics company.[101] Spotify announced Seed Scientific's team would lead an Advanced Analytics unit within the company focused on developing data services.

In July 2015, Spotify launched Discover Weekly, a weekly generated playlist on Mondays that brings users two hours of "custom-made music recommendations, tailored specifically to you and delivered as a unique Spotify playlist." Discover Weekly is a mix of users' personal taste in music as well as songs enjoyed by similar listeners. Spotify said that Discover Weekly gets better the more the users listen to it.[102] In December 2015, Quartz reported that songs in the Discover Weekly playlist had been streamed 1.7 billion times,[103] and Spotify wrote in May 2016 that Discover Weekly had reached "nearly" 5 billion tracks streamed since the July 2015 launch.[104]

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.[105] In April 2016 Spotify acquired CrowdAlbum, a company who is a photo-video aggregator, to help aggregate photos from concerts.[106]

In May 2016, Quartz reported that Spotify employees, which total over 1,600 people, earned €151,180 ($168,813) in 2015, an increase from the €60,000 average salary in 2010, despite the company reporting an increase in net loss between the years (€28 million in 2010 to €173 million in 2015).[107]

In August 2016, Bloomberg Businessweek reported that, due to Spotify's ongoing feud with Apple Music, the Apple-owned music service launched in June 2015, Spotify was deliberately making the music of artists who released first on Apple Music harder to find on Spotify. Bloomberg cites unnamed sources who say that artists who sign exclusivity deals for early release on Apple Music will not be able to have their songs on featured playlists on Spotify.[108]

In September 2016, Spotify's chief revenue officer Jeff Levick left the company, citing personal reasons.[109][110]

In October 2016, Digital Trends compared Spotify to the Apple Music service, and noted that Spotify has a library of over 30 million songs.[5]

In November 2016, Spotify launched its "largest [marketing] campaign to date", by placing large-scale billboards in major cities around the world that humorously mocked users' listening habits. Billboards featured commentary such as "Dear person who made a playlist called: ‘One Night Stand With Jeb Bush Like He’s a Bond Girl in a European Casino.’ We have so many questions"; "To the 1,235 guys who loved the “Girls Night” playlist this year, We love you", and "Dear person who played ‘Sorry’ 42 times on Valentine’s Day, What did you do?” Spotify's Chief Marketing Officer Seth Farban told Creativity that "there has been some debate about whether big data is muting creativity in marketing, but we have turned that on its head ... For us, data inspires and gives an insight into the emotion that people are expressing."[111][112]

Other developments[edit]

Streaming records[edit]

Upon its release in April 2013, the Daft Punk single, "Get Lucky", received the highest number of first-day global streams for any song.[113]

In October 2015, "Thinking Out Loud" by Ed Sheeran became the first song to pass 500 million streams.[114] A month later, 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.[115]

In April 2016, Rihanna overtook Justin Bieber to become the biggest artist on Spotify, with 31.3 million monthly active listeners.[116]

User growth[edit]

In March 2011, Spotify announced a customer base of one million paying subscribers across Europe,[117] and by September, the number of paying subscribers had doubled to two million.[118] In August 2012, Time reported 15 million active users, four million being paying Spotify subscribers.[119] User growth continued, reaching 20 million total active users, including 5 million paying customers globally and 1 million paying customers in the United States, in December 2012.[120] By March 2013, the service had 24 million active users, 6 million being paying subscribers,[121] which grew to 40 million users (including 10 million paying) in May 2014,[122] 60 million users (including 15 million paying) in December 2014,[123] 75 million users (20 million paying) in June 2015,[124] and 30 million paying subscribers in March 2016.[125]

As of June 2016, Spotify has 100 million monthly active users,[6] and as of September 2016, it has 40 million paying subscribers.[7]

PlayStation Music[edit]

In January 2015, Sony announced PlayStation Music, a new music service with Spotify as its exclusive partner. PlayStation Music incorporates the Spotify service into Sony's PlayStation 3 and PlayStation 4 gaming consoles, and Sony Xperia mobile devices, in 41 markets around the world. The service enables users to listen to their favorite tracks while gaming.[126] The new service launched on 30 March 2015.[127]

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."[128] 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.[129] As of 21 September 2016, the dispute was resolved and updates are being released for Spotify on the platform again.[130]

Criticism[edit]

Spotify, together with the music streaming industry in general, faces some criticism from artists and producers claiming they are being unfairly compensated for their work as downloaded music sales decline and music streaming increases.[8] 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.[9]

The variable, and some say unsustainable,[10] nature of this compensation, has led to criticism. 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".[11]

In response, Spotify claims that they are benefiting the music business by migrating "them away from piracy and less monetized platforms and allowing them to generate far greater royalties than before" by offering a free, ad-supported service tier, and then encouraging users to opt in to the paid subscription.[9]

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.[131]

Artists[edit]

Spotify has been accused of failing to compensate artists fairly.[8]

In a 2009 Guardian article, Helienne Lindvall wrote about why "major labels love Spotify", writing that the labels receive 18% of shares in the streaming company - something that artists themselves actually never get. She further wrote that "On Spotify, it seems, artists are not equal. There are indie labels that, 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 (which so far has amounted to next to nothing)."[132]

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".[133]

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.[134]

According to an infographic by David McCandless, an artist on Spotify would need over four million streams per month to earn the US minimum monthly wage of $1,160.[135]

In October 2011, US independent label Projekt Records stated, "In the world I want to live in, I envision artists fairly compensated for their creations, because 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."[136]

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."[137]

In March 2012, Patrick Carney of the Black Keys said that "Spotify isn't fair to artists",[138] and further commented that streaming services "are becoming more popular, but it still isn’t at a point where you’re able to replace royalties from record sales with the royalties from streams. For a band that makes a living selling music, it's not at a point where it’s feasible for us."[139] 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."[138]

Singer David Byrne of Talking Heads criticized streaming services such as Spotify in 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."[140]

In March 2014, American funk band Vulfpeck exposed a loophole in Spotify's royalty calculation model. The band created an album titled Sleepify, which consisted solely of silence. The band asked 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 service violation. Vulfpeck had accumulated enough streams to result in around $20,000 in royalties before the album was pulled.[141][142][143]

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.[144]

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.[145] 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."[146] 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".[147] In 2015, Brian Message, partner at Radiohead's management company Courtyard Management,[148] stated that he disagrees with Yorke, noting that Spotify pays 70 percent of its revenue back to the music industry.[149]

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."[150] In Rainbows (2007), the only other Radiohead album not previously available on Spotify, was added on 10 June 2016.[151]

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.[152] 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]." .[153]

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".[153][154] 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."[155] 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.[155]

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."[156]

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.[157]

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."[158]

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."[159] In December 2015, Coldplay withheld A Head Full of Dreams from Spotify until one week after its release,[160] unlike their previous album, Ghost Stories[161] and Mylo Xyloto[162] which has longest period of their work being withheld for 4 months since the official release of the particular album.[163] Beyoncé's self-titled album was not available until November 24, 2014,[164] when the platinum edition was added.[165] The Black Keys' album Turn Blue remained unavailable.[159]

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.[166] The album, originally released in January 2011, became available to stream some 17 months later in June 2012.[167] However, with the release of the latest album, 25, released in November 2015, the singer confirmed that the album won't be available to be streamed anytime soon in any streaming services including Spotify, Apple Music, and Deezer.[168] However, the album was made available for streaming seven months later, in 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.[169] Later in 2015, AC/DC[170] and The Beatles[171] 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."[172]

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.[173]

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.[174] On August 21, 2015, Spotify changed its privacy policy. Users who lacked a privacy manager in their devices started leaving Spotify over those changes.[175]

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.[158][176]

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.[176]

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."[177]

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