Spotify – Changing the Music World One Stream at a Time

For Better or Worse?

Introduction:

The ways in which we consume music have changed drastically over the course of history ever since we were able to reproduce live instrumentation as a recorded sound. From the first wax cylinder, cassette’s, vinyl and compact discs (CD’s) to the latest technology in digital downloads, file-sharing and streaming platforms, the ecology tasked in dealing with music consumption has been altered drastically as a result of digital disruptions. One of largest disruptions to the music industry in socially and economically concerned contexts are streaming platforms.

In analysing Spotify Technology S.A. (Spotify), a music streaming platform that is positioned as “legal and a superior alternative quality alternative to music piracy,” the goal of the service is aiming to help “people listen to whatever music they want, whenever they want, wherever they want” (Spotify, n.d. cited in Haupt, 2012, p. 132). Through its achievement of such a goal, we can see how Spotify has acted in numerous transformative ways within the global and national music industries.

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Caption:For those less familiar with the music platform, this is a closer look into Spotifyand how it functions. Video licensed by Techquickie under CC BY 3.0.

As a result of disruptions to music consumption in the era of the digital native, we see Spotify’s alteration of revenue streams for artists under it’s ‘freemium’ business model, a result of which sees the platform accused of “devaluing art” (Brandle, 2018). We also observe the ability of the platform in its role as a digital intermediary, aiding end users’ by understanding Altheide’s (1995, cited in Wilken, 2015, p. 43) framework of “communicative ecology” and the role of “technological convergence” (Cunningham & Turnbull, 2014, p. 4)  There is also the observation of the growing social interactions Spotify has become embroiled in with regards to censorship, while also providing access and agency in music consumption.

Victim of Changes – A Brief Overview of Spotify in a Converged World:

Spotify was founded in 2006 in Sweden by Daniel Ek and Martin Lorentzon, with the platform best described as an audio-player akin to iTunes. From humble beginnings as an invite only to the giant, multinational service, their market differentiation can be seen with their heavy focus on streaming songs with financial upkeep of their free streaming service created by advertising revenue and subscription, identified by Vonderau (2017) and Haupt (2012). As opposed to iTunes, who place focus on being able to purchase songs outright. Spotify operates on a ‘freemium’ business model, in which their premium, ad-free service is subscription based and as identified above, their free service is upkept by advertising.

Music streaming can be seen as a direct cause of disruption traditional forms of music consumption, with internet technologies shifting majority consumption to a digital basis rather than physical purchases such as CD’s and vinyl. Haupt (2012), notes that music streaming is not necessarily a new concept, with examples such as Pandora Media, Last.fm and Napster predating today’s market (the latter of which saw a high profile legal case brought against it by artists such as Metallica and Dr. Dre). Vonderau (2017, p. 4) observes the success of Spotify over competitors as the “Spotify effect”, in which we see the company’s ability to converge markets through public perception and unlimited economies of scale in a digital space.

Rob Trujillo, Metallica bassist on stage.

Caption:An on-stage photo of Metallica bassist, Rob Trujillo. Licensed under the Creative CommonsAttribution 2.0 Generic

This is particularly evident within the Australian music industry sector of 2017, in which the Australian Recording Industry Association (ARIA, 2017) observed streaming revenue make up 54% of the total value. As noted by Bloomberg (2018) Spotify currently have 159 million monthly listeners, with 71 million premium subscribers (correct as of December 31st).

What positions Spotify as the front runner amongst other streaming competitors, is the company’s ability to extrapolate maximum advantage from a technologically converged world. Cunningham and Turnbull (2014, p. 4) describe such a convergence as “enabled by technologies of digitisation.” Technological convergence and its role in Spotify cannot be underestimated in understanding the increasingly important social and economic changes. Such a convergence defines the platform’s basis, in which we see the dissolution of physical barriers between the music and cyber-realms. Whereby, Spotify act as a music distributor, switching to digital bases from traditional forms, emphasising Spotify’s understanding of the cultural relevance of technology and the importance of internet databases in.

Spotify as a Platform:

Spotify’s largest impact can perhaps be felt in economic terms both in terms of business revenue and artist royalties, forever altering the music industry business models and valuation of music as a commodity by audiences. This begs the argument put forth by Chambers (2017) that platforms act to instil a relationship between the service and end-user, rewarding engagement within the platform.

 

Caption:An ecology of Spotify in today’s contemporary, technologically converged world. By Dean Fernance.

Before exploring the economic impacts of Spotify, we must understand how the platform retains premium subscribers. Chen, Leon and Nakayama (2018, p. 3) observe this through two phases of “alluring and hooking.” We can see the phase of alluring take place through Spotify’s advertisement supported content, drawing customers to the platform through social influence, facilitating a positive attitude towards the service and therefor trust.

Embedding the “hooking phase” through its end users is done through what Chen et al. (2018, p. 5) describe as “hedonic fulfilment of service subscribers,” which deals with user satisfaction and facilitating conditions of usage. Hence, users will feel rewarded with easy platform access through playlist creation, similar artists and even the profiling of mood to determine music recommendations and advertisements. This notion is observable in Spotify’s platform design and ease of access, navigation and recommendations for similar artists to your current choices for end-users. Spotify utilise curated content such as playlists within the platform to increase song play-time, allowing users the ability to follow and track additions to themed playlists, examples of which include genre and mood.

Spotify - Themed Playlists

Caption:An example of themed Spotify playlists based on genre and listening moods. Photo by Dean Fernance.

This falls in line with a “communicative ecology approach” (Altheide, 1995, cited in Wilken, 2015, p. 43) to understanding Spotify. In which we are dealing with structural integrations within design to further usage, as well as engage and communicate between users through themes and utilise aggregated data to specify points of interest to individuals. In turn, such an observation reinforces Chambers (2017, p. 31) notion of platforms rewarding engaging behaviour.

Money – The Business of (dealing with) Spotify

As explored above, Spotify’s business model is a “freemium” service, which we see two forms of revenue in advertising and subscription-based channels, thus maintaining the economic viability of Spotify over predecessor platforms such as Napster and Pandora. However, there has been an identifiable shift towards “bolstering data analytic capabilities” (Mahdawi, 2018) in order to further their advertising successes.

Mahdawi (2018) reports, their aim in retaining advertising revenue and aiding marketers using their database by using your choice of music, combined “geocoded data,” (Wilken, 2015) and other third-party data available to them to determine end-user mood. The commodification of personal moments connected with music has now become a tool of marketer trade.

There is an inherent fear within the music industry around creators and their content, with a particular focus in retaining economic control of music for artists and labels. Hunter and Suzor (2015) highlight such a fear and how it became reality in the digital age, in which piracy saw the mass devaluation of music, removing its strength as a commodity. This perpetuates a new argument, one that Spotify is positioned to compete with piracy, providing intermediaries such as artists and labels the means to mass disseminate content.

Despite the success of Spotify as a platform itself, there is controversy in the ways it has forever transformed and diminished streams of revenue for artists in particular from music as a commodity. According to Kabir (2018), the rights holder of the music is expected to receive  between $0.006 to $0.0084 per song stream. Kabir (2018) also notes that music rights are owned by numerous stakeholders within the music industry, from producers, song writers and record labels. Spotify has borne the brunt of such criticism.

Vonderau (2017) notes the impact of such low royalty rates, in which trickle-down effects are rarely felt by smaller artists and labels who as a result, have their music receive a pre-determined value from Spotify based upon stream location, streams from free end-users and paying end-use, advertising revenue, emphasised by Voogt (2018).

A result of Spotify’s pittance of a royalty system in their efforts to continue digital market domination, can be observed as one of the most transformative changes brought about by internet transformations within the music industry. Through the access afforded to artists and end users alike in platform access is more available than ever.

However, it is not without penalty whether that be data-mining and the commodification of personal moments with music, or the de-valuation of music down to less than a single cent per stream. The transformative nature of Spotify and the internet in music is undeniable.

Take The Power Back– Spotify and Social Transformations:

Spotify has not only been transformative within music industry economic structures but can be seen as a disruptor to social narratives within music and its consumption, acting in numerous transformative ways. Hyojung (2017, p. 22) puts forth the notion of the social shaping of technology (SST) which “emphasises that social factors, rather than being driven by the inner logic of technologies or design, configure technological changes.”

This is evident in the very creation of Spotify, which Hyojung (2017) traces to wanting to combat music piracy in both quality and quantity. Such a task can be seen in restoring some of the value that music piracy strips from music as a commodity, an extensive social change during the time when piracy was at its highest, reinforced by Hyojung (2017) and Vonderau (2017).

Another area where we can see the impact of a technologically converged world presenting new social issues is in the dissemination of certain content being blocked by Spotify, whether it be for criminal matters related to content creators or propaganda. In applying the communicative ecology, van Dijcks (cited in Wilken, 2015, p. 43) understanding of innovative platforms and their space in “larger communicative eco-systems” is useful in exploring a social policy Spotify attempted to implement around “hateful conduct” and its moderation on sponsored and corporate playlists. The notion of larger communicative systems allows us to explore music as a tool of message dissemination, with Spotify providing an almost unprecedented database for dissemination.

In aiming it implement such a policy, Spotify fell short of its goals. Rolling Stone (2018) reported the “streaming company walks back policy that took R. Kelly, XXXTentacion off playlists” under the policy, two artists that have sexual assault and criminal convictions. Rolling Stone reports that “high profile dissent” saw artists as cultural intermediaries such as Kendrick Lamar and fans alike revolt against the service attempting to moderate content based on current social climates it is perceiving. Chambers (2017) understands that social platforms act as tools of empowerment, and this is no different for Spotify, affording content creators the tools to reach large audiences.

Through exploring Spotify’s social positioning under a “communicative ecology” we can observe the platform as having further reaching and increasingly transformational powers and social influence than first thought. Spotify as a cultural intermediary, aiding end-users in understanding and interpreting their world, afford the platform newfound powers based on exploring it outside of merely a music dissemination network. Instead, looking inward at company policy and content propagated by the platform.

You Suffer But Why? Conclusion:

Spotify has enacted transformative powers across the music industry, from redefining and removing revenue streams for artists to its ever-increasing social influence in content dissemination. From well-intentioned beginnings in an attempt to curb music piracy and subsequently add value to music through platform design and competitive differentiation, they themselves have now perpetuated cycles of transformation that have forever changed the face of the music industry, Through the devaluation of music as a commodity to less than a single cent per stream, to exercising moral superiority in content dissemination, Spotify itself has become lost in its own transformative change to a degree. In providing agency and an innovative method for music consumption that does see some level of remuneration for artist’s music as opposed to music piracy, there is success to be found. However, there is still room for further transformation in order to protect and support content providers and other important stake-holders attempting to utilise the platform.

References:

Australian Recording Industry Association. (2018). ARIA 2017 music industry figures show 10.5% growth. Highest annual growth since 1996. Retrieved from http://www.aria.com.au/home.htm.

Bloomberg. (2018). Company Overview of Spotify Technology S.A. Retrieved November 18, 2018 from https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=225595077.

Brandle, L. (2018, November 20) Taylor Swift just signed a huge deal with Universal, and changed the game again. The Industry Observer. Retrieved from https://www.theindustryobserver.com.au/.

Chambers, D. (2017). Networked intimacy: Algorithmic friendship and scalable sociality. European Journal of Communication,32(1), 26 – 36. doi:10.1177/0267323116682792.

Chen, C., Leon, S., Nakayama, M. (2018). Are you hooked on paid music streaming? An Investigation into the Millennial generation. International Journal of E-Business Research 14(1), 1 – 20. Retrieved from: https://www.researchgate.net/publication/321254648.

Cunningham, S., Turnbull, S. (2014). Introduction: The media and communications today. In S. Cunningham., S. Turnbull (Eds.), The Media and Communications in Australia, 4th edition (pp. 1-14). Crows Nest, Australia: Allen & Unwin.

Haupt, J. (2012). Digital media reviews. Notes, 69(1), 132 – 138. Retrieved from http://www.jstor.org.ezproxy1.library.usyd.edu.au/stable/23271778.

Hunter, D., Suzor, N. (2015). Claiming the moral high ground in the copyright wars. In P. McGuinness (Ed.), Copyfight(pp. 131–145). NewSouth Publishing.

Hyojung, S. (2017). Digital disruption in the recording industry (Doctoral thesis, University of Edinburgh, Scotland, United Kingdom). Retrieved from http://hdl.handle.net/1842/23631.

Kabir, S. (2018, January 26). Spotify and Apple Music should become record labels so musicians can make a fair living. CNBC. Retrieved from https://www.cnbc.com/world/.

Mahdawi, A. (2018, September 16). Spotify can tell if you’re sad. Here’s why that should scare you. The Guardian. Retrieved from https://www.theguardian.com/au.

Vonderau, P. (2017) The Spotify effect: Digital distribution and financial growth. Television & New Media, 0(0), 1-17. doi: 10.1177/1527476417741200.

Voogt, B. (2018). The artist’s guide to spotify: Playlists, royalties, verified profiles and more. Retrieved November 20, 2018, from https://heroic.academy/artist-guide-spotify-playlist-royalties-verified-profiles/.

Wang, A. X. (2018, June 1). Spotify’s ‘Hateful Conduct’ Policy Is Officially Dead. Rolling Stone. Retrieved from https://www.rollingstone.com/music/music-news/spotifys-hateful-conduct-policy-is-officially-dead-628598/.

Wilken, R. (2015). Mobile media and ecologies of location. Communication Research and Practice, 1(1), 42–57. doi: 10.1080/22041451.2015.1042423.

Dean Fernance
About Dean Fernance 4 Articles
Music has been part of Dean’s DNA from a very young age, going to his first metal gig aged 9, it blew him away and became his passion! Music inspired Dean to get through tough times at school and university, and that’s when he knew that it could just become more than a passion. Nearly a decade on, Dean is currently enrolled in a Bachelor degree of Advanced Studies in Media Communications and Digital Cultures at Sydney Uni. Dean also works part-time for a digital marketing agency, specialising in content and community management. It’s his role as President of the University of Sydney Metal Society that is so inspiring him towards a career in music media and journalism. In tapping into the music industry, Dean has now reviewed and is continuously connecting with international artists such as Dizzy Reed of Guns N Roses, Machine Head, Tesseract, Leprous, Cattle Decapitation and Of Mice & Men.

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