The ways in which humans enjoy music has been an ever-evolving journey of innovation and technological development. From sharing music by ear, phonographs, vinyl, radio, MP3, and the streaming of today, humans have sought the most effective and economical ways to share music. The history of streaming begins with early television, where raw and unprocessed video is transmitted to the home (Dixon, 2013). The streaming of films and books is largely attributed to Netflix and Amazon respectively, subsequently inflating the price of DVD rental or store bought physical books (Williams, 2018). For music, Spotify and YouTube are two of the largest streaming services (Nguyen, Dejean, and Moreau, 2013), with YouTube being debatable as it offers services non-exclusive to music. The music streaming industry ha snot only been extremely influential to the ways music is consumed, but also is progressively popular and profitable.
- YouTube – 1.5 billion
- NetEase – 400 million
- SoundCloud – 175 million
- Spotify – 170 million
- iHeartRadio – 100 million
- Pandora – 74 million
- Gaana – 50 million
- Apple Music – 50 million
- Anghami – 33 million
- Deezer – 14 million
Spotify was founded in Sweden in 2006 by Daniel Ek and Martin Lorentzon, launching in 2008. Spotify is described as a company providing music streaming services worldwide; both Premium and Ad-Supported. The premise of Spotify is as a “legal and superior quality alternative to music piracy” where users can “listen to whatever music they want, whenever they want, wherever they want” (Spotify, n.d. cited in Haupt, 2012, p. 132). The application Spotify can be used through tablets and mobile phones, or can be accessed via computer.
The Internet and the Music Industry
The internet has provided a way for all kinds of information to be transmitted around the globe. Prior to the internet, music purchasing was restricted to hard copy forms, such as vinyl, cassettes and CD’s. Listening to music for free was only enabled by radio, television, and free live music events. The downside of radio, television and live music listening is that the music being played is predetermined by another, with the exception of song requests. However, with the innovation of the internet, music can be sourced online and played when one chooses.
Consequently, music piracy had arisen. Royalties of the music acquired is still owed, and acquiring music through digital copying begins to challenge ethics and laws surrounding copyright. Michel (2006) finds that music piracy in the form of digital file sharing has directly influenced the music industry. Between 1999 and 2003, a 13% reduction of album sales can be attributed to the act of file sharing, alongside the existing pattern of declining album sales. Illegal file sharing is a direct threat to the music industry.
Where does streaming fit in? It is legal to stream music; music artists and labels receive their due royalties, and streaming services reap the profitable benefits too. Spotify negotiates with record labels the rights to have musical artists music on their servers and consequently ‘lend’ it out to Spotify users through streaming. Nguyen, Dejean and Moreau (2013) have examined that free streaming through services such as YouTube and Spotify have no significant impact on CD sales. Moreover, their evidence suggests that free streaming services through the internet promotes live music attendance, with evident increases in live music attendance for national and international artists found on the streaming services.
Spotify’s Business Model
Spotifys business model competely revolves around the success of the internet, and subsequently the creation of streaming. To be able to stream music enables a musical audience to receive their music through a completely different route to the age old store to door physical purchase.
Access, not ownership… The reduction of music piracy is sought by Spotify. Founder Daniel Ek (2011) states “we started Spotify because we love music and piracy was killing it.” By providing a free service for music legally, Spotify diverts the need for users to illegally download music from other sources. Spotify has “acquired licenses to stream those tracks from the record labels, composers, artists, [etc.]” (Gilmour, 2011). Music is not given directly to users, but rather remains stored by its own servers and lent out in the form of a temporary cache. In this way, Spotify utilises the internet to share music in a way which minimises harm to the music industry. Artists and associated members are paid for their content, and consumers receive their music legally.
Papageourgiou (2016) describes what Spotify does as “access versus ownership”. Before Spotify and it’s streaming competitors, music online was sold piece by piece (Heimer, 2010). Premium Spotify users pay for the usage of all music at once, rather than for each individual item. There is no limit to how much music one can have access to. However, unlike with the purchase of a CD or a song on iTunes, the song one can listen to does not then become ones to keep. Rather, through the cache one can have momentary access to the sought after music, and it stays in the possession of record labels and Spotify. This is why Spotify can be so legally cheap, or rather, free.
Spotify and its musical content providers make money. Spotify makes revenue through two avenues; advertisement and subscriptions. Those on the “Ad-Supported” account will receive occasional advertisements between songs, thus Spotify receives payment from advertisers for its listening time. Alternately, Spotify users can pay for a “Premium” account to avoid advertisements, and consequently Spotify still receives payment for its services. Creators, the providers of musical content, receive payment of between $0.006 to $0.0084 per stream. This payment will be received by the holder of musical rights, which is musicians/songwriters, and potentially additionally producers and record labels.
Competition, Contention and Criticism
Spotify as a music streaming service is comparative to other well known streaming services such as Tidal and Apple Music. Tidal stands in opposition to Spotify on supposedly offering musicians a better deal than Spotify has been, which brandishing a larger repertoire. Apple Music challenges Spotify with supposedly superior music quality and high stake exclusive releases.
Taylor Swift is one artist who in the past has pulled her music from Spotify, which has since been reinstated on Spotify. She has made vocal her disapproval of underpaid artists and free music, stating:
“Spotify [feels] to me a bit like a grand experiment. And 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. And I just don’t agree with perpetuating the perception that music has no value and should be free.”
Through partnerships, Spotify has outplayed its competitors. Spotify boasts numerous more partnerships than the likes of Apple Music or Tidal, extending its reach into transport through partnerships with Uber, Virgin America Airlines, Volvo and BMW to note a few.
Spotify has come under criticism for its failure to transform into a profitable business despite its large number or users and content. From January to March of 2018, Spotify lost $49 million. Spotify’s royalty payments to record labels and artists has grown increasingly in tandem with the company’s popularity growth. Scrutiny has also been directed towards Spotify’s very competitively cheap rates for users. Furthermore, Spotify offers free usage of its music services with subsequent advertisements, yet this evidently has not been enough to suffice. It has been predicted that the only ways to resolve Spotify’s financial issue is to either increase the monthly price for premium, reduce the price of royalties being paid out to musicians and record labels, to modify its free service, or any combination of the suggested ideas.
Music has always been a universally unifying component of culture across the globe. Inherently, that which is music related has close ties and relations to human interaction. One can see this happen with Spotify particularly in relation to its sharing capacity. Spotify fuels the experience of sharing music through streaming live concerts and publicly displaying playlists, both user-made and Spotify regulated.
Users can extend their music beyond the confines of Spotify itself by linking music to other social media sites, or by emailing or texting links. The role of developing Spotify’s sharing capability and social relations falls to Kerry Steib; she connects communities of music lovers, artists and activists. Spotify and similar internet-using streaming services have revolutionised the way that music is circulated in a social manner. Sharing music is not confined by time and space, as has been the case with physical CDs and face to face interaction. The boundaries of physical reach in the globe extends as far as Spotify’s global presence reaches. As with most social media sites, individuals can find their cross cultural counterparts to collaborate with, specifically on Spotify in the form of listening to and sharing communal playlists.
However, global community presence has not been all sunshine and easy going. Hate speech, and in this case hate music, had ultimately found a place on Spotify servers. Spotify has taken action to regulate which musicians are present on its application and which are not. Hate speech has been reduced and challenged as Spotify has removed white nationalist bands. The challenge currently faced by Spotify is where to draw the line. The company faced criticism for removing the music of XXXTentacion and R. Kelly, and then double-backing on their decision. Scrutiny had arisen that removing criminally convicted artists was a step too far and perhaps would lead to unfair prejudice in an already heated social environment.
The technological revolution of the internet has been a magnificent transformational element in the late 20th and 21st centuries. The potential for users to access music without a physical copy has been revolutionary. Initially, this was problematic, with the arrival of music piracy. However, streaming utilises the digital nature of online music in a legal way. Spotify’s streaming service appears to be an all-around win for all involved. Artists earn royalties per stream, users get free or cheap musical content, Spotify provides a service and makes profit. However, in reality there are a few problems with Spotify’s revolutionary ‘access not ownership’ business model. Financially, Spotify may not be capable of sustaining its current pattern whilst providing free access to music. Musical artists and record labels who are already receiving mere royalties face the reduction of their rates. Perhaps this would prompt more Taylor Swift-like removals of music on the site. Regardless, streaming services like Spotify enable a haven for the effective social sharing of music. Artists can reap the benefits of their music being shared online universally, and internet users have greater access than ever before to music in the palm of their hand.
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