The Rise of Spotify: Evolution in the Music Industry

The use of streaming and audio production platforms has skyrocketed in recent years. Spotify, the music streaming platform created by Swedish Entrepreneur Daniel Ek in 2006, is among the leading names in its industry.

This article is available in audio form, read and audiodescribed by the authors

According to The Verge, Spotify has 345 million monthly active users, and statistics suggest that this number will only continue to increase. However, success for Spotify as a corporation comes with a long list of pros and cons for the artists and consumers who make up the platform’s user base. 

Digital Platforms as Opposed to Physical Formats

Nowadays, music is mainly purchased digitally, either via download or streaming. 

As a modern phenomenon, the history of recorded music is recent. Before, the only way to consume music was to listen to it live. In 1887, the phonograph appeared and paved the way for the development of new recording technology and formats. Later came vinyl records, magnetic tapes, compact discs, MP3s and finally, streaming.

Developed in 1992, the MP3 format only gained popularity after 1999, with the creation of Napster. This controversial application allowed thousands of Napster users to share music as MP3 audio files, in what could possibly be the largest musical library ever assembled. It eventually led to platforms like iTunes. Shawn Fanning, one of the 2 founders of Napster, told the BBC World Service how “For the first time this full history of recorded music was available online to everyone instantly.” Record labels turned this idea into a legitimate business model. Today, true digital streaming services are totally changing the way we consume music.

What format do artists prefer? Painting Shadows is a Berlin-based-band formed by Ario Behshad, Jan Pablo Arce Lemke, Luca Alacán Friedrich and Pedro Riera Hipp. These four students “enjoy reviving an old rock n roll sound with some contemporary vibes.” They reluctantly use digital formats : “We don’t really have a choice. It is much more expensive to release our music in a physical format than a digital format.” Jack Campbell, musician and music software engineer in Colorado, is much more enthusiastic about modern technology and shares that he “would always choose non-physical media over CDs at this point.” He also defends Bandcamp, an American Internet music company where artists and labels upload music and fix the prices. In contrast to Spotify, there is no need for a label, a distributor or any middle man on Bandcamp. Bandcamp puts artists first. Spotify gives priority to listeners.

Painting Shadows

The reason streaming platforms are so successful is that “it has become really easy to listen to music” says the German band. For a small monthly subscription fee (Spotify Premium version costs 9,99€ per month), and even for free if you are willing to do away with some very practical features, you can have access to thousands of albums and songs. Spotify can even be used offline. Indeed, all you need is your phone to store downloaded music.

But at such a low price, what are the real costs for artists and consumers? 

Perspectives on Copyright 

Just for a small monthly fee, Spotify offer music fans instant, limitless access to music from all over the world and across history.  

However, over the past several years, artists have complained increasingly about not receiving fair compensation from certain music streaming platforms. Streaming industry is currently making amends and offering direct or indirect financial assistance to support the music community. Such services include allowing artists to fundraise through their Spotify profiles or enabling artists to post and stream their content to fans from home. Spotify now pays copyright and gives compensations for original creations in an attempt to adapt to the needs of both artists and users.  

Intellectual property issues and creative possibilities both enter into the discussion about whether Spotify represents an exit for music label crisis or not.  The amount payed for downloads is about 70% of  revenues generated from selling, advertising and from paid subscriptions. 

Statistics from IFPI,  the association that represents the recording industry worldwide, showed that in 2020, 46 percent of record companies’ worldwide revenues came from online digital services.  

Since its creation Spotify has argued that « streaming » broadcasts guaranteed reproduction or distribution rights under the copyright law.   Spotify’s Copyright Policy main page claims that

Spotify respects intellectual property rights and expects its users to do the same… If you are a copyright holder and you believe that any of the copyrighted material, which is directly available via the Spotify Service infringes your copyrighted work, please let us know.” 

Spotify Copyright Policy

Despite this creed, Spotify reached an agreement with the National Music Publishers Association (NMPA) in 2016 to assume responsibility for royalties that had not been paid since the company’s founding.  

Although Spotify’s Copyright Policy seems to be robust, there are still doubts about its principles today. 

Do Streams Put Food on the Table?

Spotify’s self-proclaimed mission statement declares their desire to “unlock the potential of human creativity – by giving a million creative artists the opportunity to live off their art…”  There are currently over 3 million artists streaming on Spotify. But how many of those artists make a living solely off of their work published to the platform? In other words, are artists really compensated for their work? This is one of the main issues artists take up with the streaming giant. 

The compensation received by artists from Spotify is broken down into three components.

  1. Mechanical Royalties accumulate each time a consumer streams an audio file on Spotify. 
  2. Public Performance Royalties dictate that every stream of an audio file on Spotify is considered a public performance. 
  3. Payouts to Recording Owners are made to the copyright owners of a recording and are typically the largest percentage of an overall payout. 

Provided by Soundcharts Blog

What does all of this mean? According to the calculations made by Soundcharts, artists on Spotify receive a whopping $0.0032 per stream. For Jack Campbell, this calculation means that achieving more than one million streams doesn’t equate to the rockstar payout that some people may imagine. Campbell’s most successful song, Absentee (2013) has been streamed over 1.9 million times on Spotify. However, the compensation for this otherwise impressive feat totals out to roughly $3 000 per year. 

In other situations, the compensation received from Spotify is just enough to cover the fees of its services. Painting Shadows pays the relatively low annual fee of 50€ to their distributor, Distrokid. With their most successful songs being Unsettled Boy and Flowers on Cocaine (2019) at 31,000 and 17,000 streams respectively, the financial benefits of streaming their work to Spotify is directly funneled back into the fees paid to their distributor. 

Of course, supporting oneself as an artist in the music industry is made up of countless dynamics that extend past the world of digital streaming. “A career for a musician has always been about gigging and setting up as many reliable streams of income as possible, through merch, touring, CD sales, streaming… Spotify absolutely could pay out more, but they are just one piece of the puzzle” says Campbell. 

The Other Pieces of the Puzzle 

In 2021, Spotify reached an incredible figure of 155 million premium subscribers, part of their 345 million monthly active users. Spotify really crushed their competition with their affordable premium package – especially for students – while one of their main competitors, Deezer, boasts a respectable number of 7 million premium users worldwide. The Swedish juggernaut is the place to be for artists worldwide if they are to entertain a wide audience. But for each advantage Spotify offers the artist, there are downsides to take into account.

Producing more content increases artists’ visibility. The “Discovery” playlists generated by Spotify also changed consumers’ habits of listening to music. The algorithm tracks listening habits and recommends music that matches these habits and music that is gaining in popularity. Spotify’s algorithm determines that a song is getting popular if it does not get skipped in the first thirty seconds. Spotify is a streaming service that works like a social media, hence the importance of popularity.

Painting Shadows actually feels that too much competition hurts creativity: “having all the music in the world available in your pocket is amazing but consequently “the notion of the so-called “concept-album” is disappearing and it seems to us that non-transcendent, “fast-food” music will persist, while more sophisticated music will cease to exist.” Competition leads to overproduction.

The competitive aspect of the music industry also makes upcoming artists question how much they want to be involved or pursue a career in music. With digital streaming overtaking physical copies, there are new landmarks to reach for musicians and success is measured in clicks and downloads. Nowadays, artists recognise that and yet the value of accomplishments remains subjective.

Jack Campbell, a decade long user of Spotify as both an artist and consumer “wouldn’t say that the act of publishing music to Spotify feels like an accomplishment” while he admits that the process of making and recording music is still as fun as ever. On the other hand, Painting Shadows saw “a great opportunity to share our ideas through music with family and friends,” which is an indisputable accomplishment. Spotify offers a platform for artists to create and share their art, but it also shapes how people produce and listen to music.

Spotify: Here to Stay?

All indicators point to Spotify as a piece of the streaming platform community that will be popular for decades to come. However, the fluctuation of benefits and limitations offered to the artists and consumers active on the platform will dictate just how long the application remains popular. For the time being, it appears to have a steady enough user base to allow it to stand up against competitors such as Apple Music. But the digital past shows that it only takes a new up-and-comer to make an empire come toppling down. 

Article written for Media Criticism MC2L class by: Erdem Ozgunay, Madelyn Colvin, Shamene Rajendrabose and Elaine Nava

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