Music is part of our lives, the means by which people have been listening to records has been constantly changing throughout music’s history, including vinyl, cassette, CD, mp3 and streaming which are currently the most common amongst the public. In the last 10 years streaming platforms have changed the music industry in many ways. For example, the way that people listen to music, the revenue the artists are making from their records. Platforms like Itunes, Pandora, and Spotify have been fighting for the monopoly of the streaming and at this time Spotify has proved to be the strongest one in the streaming music services industry.
The following essay will begin to give an overview of the history of Spotify’s place and how it hit the music industry since Spotify has emerged. Then, we will analyze how Spotify has to affect record labels and artists, and how their response was.
Body Paragraph 1 HISTORY and Business Model
Spotify was created in 2006 By Daniel Ek and Martin Lorentzon, in Stockholm, Sweden. The name comes from a combination of the words ”Spot and ”identify”.
Spotify was launched live in Sweden, Finland, Norway , Spain and France in October 2008. Few months before, platforms used by the public to share digital content like Pirate Bay were brought to court 1, and the European Union reformed anti-piracy laws. This was a very good opportunity for Spotify to gain popularity on the market as a platform that can access and offer the majority of global music for a small monthly fee. “It wasn’t just that it was now illegal. People discovered Spotify and realised it was actually better than piracy.”. 3 spotify is operating right now in 65 countries.
The service initially started free of charge, and available by invitation only. This was to manage the growth of the service. The launch offered paid subscriptions to everyone. At the same time, Spotify AB announced licensing deals with major music labels. Spotify operates under a freemium business 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 called “Spotify for Artists” which explained its business model and revenue data. Spotify receives its content from major record labels as well as independent artists, and it 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 it 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
At this stage, Spotify has more than 35 million songs and an estimate of 180 million registered users. Besides, Spotify announced to have 83 million paying subscribers in the world, which is an impressive number in comparison to the figures from their competitors 3
But with all this growth, Spotify and the music streaming industry have been harshly criticised for artists and producers.
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Spotify has been heavily criticised by artists and the media, who described the service as an ‘Unsustainable’ compensation. 4
Unlike direct physical sales and legal downloads, which pay artists a fixed price per song or album sold, Spotify pays royalties based on their “market share”—the number of streams for their songs as a proportion of total songs streamed on the service. Spotify distributes approximately 70% of its total revenue to rights-holders, who will then pay artists based on their individual agreements.11 Multiple artists and bands have given harsh critique to Spotify over its payment policy, with the most notable examples being Thom Yorke and Taylor Swift, two hugely successful artists who withdrew their entire music collections from the service
Spotify offering direct distribution deals to artist
Some artists and indie musicians see Spotify fairly positively – as a way of getting noticed, of getting your music out there where folks can hear it risk free.