Apple announced at WWDC some disturbing news for several companies which we have thought of as potential IPOs in 2015. Here is a quick breakdown of what Apple’s announcement at the Apple Worldwide Developers Conference 2015 means to the industry. Below is a quick walk-through on the some of the tech startups who will be affected, […]
Spotify is a music, podcast, and video streaming service that was officially launched on 7 October 2008. It is developed by startup Spotify AB in Stockholm, Sweden. It provides digital rights management–protected content from record labels and media companies. Spotify is a freemium service; basic features are free with advertisements or limitations, while additional features, such as improved streaming quality and music downloads, are offered via paid subscriptions.
Spotify is available in most of Europe, most of the Americas, Australia, New Zealand, and parts of Asia. It is available for most modern devices, including Windows, macOS, and Linux computers, as well as iOS, Windows Phone and Android smartphones and tablets. Music can be browsed through or searched for by parameters such as artist, album, genre, playlist, or record label. Users can create, edit, and share playlists, share tracks on social media, and make playlists with other users. Spotify provides access to more than 30 million songs. As of June 2017, it had more than 140 million monthly active users and more than 60 million paying subscribers as of July 2017.
Spotify pays royalties based on the number of artists' streams as a proportion of total songs streamed on the service, unlike physical or download sales, which pay artists a fixed price per song or album sold. They distribute approximately 70% of total revenue to rights holders, who then pay artists based on their individual agreements. Spotify has faced criticism from artists and producers, including Taylor Swift and Radiohead singer Thom Yorke, who feel that it does not fairly compensate music creators as music sales decline and streaming increases. Spotify announced in April 2017 that artists will be able to make new album releases exclusively available on the Premium service for a maximum of two weeks if they are part of Universal Music Group and Merlin Network, as part of its efforts to renegotiate new license deals with record labels for a reported interest in going public.
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, "Spotify for Artists", that explained 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.
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 diverges from the OMM and competitors such as iTunes Store and Amazon Music that have dropped DRM.
The Spotify for Artists website claims that “a Spotify Premium customer spends 1.6x more per year compared to the average spending of a U.S. music consumer who buys music (not including those who spend $0 on music)", with the annual value of the average U.S. 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 U.S. music consumer."
Additionally, the website also includes a section entitled "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, the United States, 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.
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."
Accounts and subscriptions
As of June 2016, the three Spotify subscription types, all offering unlimited listening time, are:
|Type||Free of ads||Mobile listening||Enhanced sound quality||Listen offline||Monthly price|
|UK||US||Australia||Canada||Europe (C)||Europe (East)||Brazil||Turkey|
|Spotify Premium[note 1]||Yes||Yes||Yes||Yes||£9.99||$9.99||$11.99||$9.99||€9.99||€6.99||R$16.90||TL13.90|
- The Premium subscription allows users to download media for later offline listening, offers enhanced sound quality up to a 320kbps bitrate, has Spotify Connect functionality, and allows mobile users to listen to the exact songs they want instead of being limited to a shuffle-only mode in playlists and full albums.
In March 2014, Spotify introduced a new, discounted Premium subscription tier for active students. Students in the United States enrolled in a university can pay half-price for a Premium subscription. In April 2017, the Students offer was expanded to 33 more countries.
Spotify introduced its Family subscription in October 2014, connecting up to five family members for a shared Premium subscription. Spotify Family was upgraded in May 2016, letting up to six people share a subscription and reducing the price. In order to get a family subscription, users would have to provide the exact same address as the 'head' of the family, and their accounts would have to originate from the same setting (a full 6-member family made up of accounts made in Australia, etc.). A shared subscription does not mean that all family members would have to share their music and playlists. Family members each have their own account and are entitled to their own library of music, including playlists, albums, and songs. Getting a family subscription simply reduces the cost of getting Spotify Premium.
In 2008, just after launch, the company made a loss of 31.8 million Swedish kronor ($4.4 million).
Years after growth and expansion, a November 2012 report suggested strong momentum for the company. In 2011, it reported a near US$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.
Another income source was music purchases from within the app, but this was removed in January 2013.
In May 2016, Spotify announced "Sponsored Playlists", a monetization opportunity in which brands are able to specify the audiences they have in mind, with Spotify matching the marketer with suitable music in a playlist.
In September 2016, Spotify announced that it had paid a total of over $5 billion to the music industry. In June 2017, as part of renegotiated licenses with Universal Music Group and Merlin Network, Spotify's financial filings revealed its agreement to pay more than $2 billion in minimum payments over the next two years.
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".
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.
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. The financing was closed in June 2015, with Spotify raising $526 million, at a value of $8.53 billion.
In January 2016, Spotify raised another $500 million through convertible bonds.
In March 2016, Spotify raised $1 billion in financing by debt plus a discount of 20% on shares once the initial public offering (IPO) of shares takes place. The company was, according to TechCrunch, planning to launch on the stock market in 2017, but is instead planning on doing the IPO in 2018 in order to "build up a better balance sheet and work on shifting its business model to improve its margins".
Spotify offers advertisers ten different types of advertising formats, described in their Ad Formats as: Branded Moments, Sponsored Playlists, Sponsored Sessions, Video Takeovers, Audio, Display, Overlay, Homepage Takeovers, Branded Playlists, and Advertiser Pages. These advertisements vary in size, type and user engagement.
- Branded Moments allow brands to "tell their story over a series of sequential displays with 100% share-of-voice during the 30-minute session" by using "an immersive vertical video" and can unlock 30 minutes of uninterrupted music.
- Sponsored Playlist is an "exclusive one week sponsorship of Spotify’s top owned & operated playlists".
- Sponsored Sessions allow brands to "offer their audience uninterrupted listening in exchange for a video view". They are only available on mobile and tablet devices and are limited to select markets.
- Video Takeover is a "video spot with a companion display unit", are "served during commercial ad breaks between songs in a music session", and are only available on the computer apps.
- Audio Ads are "served during commercial ad breaks between songs in a music session" with a maximum duration of 30 seconds and play every 15 minutes.
- Display Ads are "clickable images displayed for 30 seconds". Display ads are shown at the bottom of the Spotify client.
- Overlay is "Spotify's 'welcome back' ad. It greets returning users on mobile and desktop with a can't-be-missed, large display ad to maximize brand impact and performance".
- Homepage Takeovers are "a combination of background skin and optional interactive area that takes over the Spotify homepage".
- Branded Playlists are "Spotify playlists that contain a branded cover art image and text". They can only have one song per artist, and must have a minimum of 20 tracks in the playlist.
- Advertiser Pages are a "microsite seamlessly integrated into the Spotify player", that can "contain practically any content you'd find on a webpage, including videos, clickable images, blogs, news, links, and comments."
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. However, the ability to purchase and download music tracks via the app was removed on 4 January 2013.
Spotify for Artists
In November 2015, Spotify introduced a "Fan Insights" panel in limited beta form, letting artists and managers access data on monthly listeners, geographical data, demographic information, music preferences and more. In April 2017, the panel was upgraded to leave beta status, renamed as "Spotify for Artists", and opening up to all artists and managers. Additional features include the ability to get "verified" status with a blue checkmark on an artist's profile, receiving artist support from Spotify, and customizing the profile page with photos and promoting a certain song as their "pick".
Spotify has apps available for Windows, macOS, and Linux computers, along with Android, iOS, and Windows Phone smartphones and tablets. It also has a proprietary protocol known as "Spotify Connect", which lets users listen to music through a wide range of entertainment systems, including speakers, receivers, TVs, cars, and smartwatches. Spotify also features a web player, for those who are unable to - or do not want to - download any app. Contrary to the apps, the web player does not have the ability to download music for offline listening. In June 2017, Spotify became available as an app through Windows Store.
On Spotify's apps, music can be browsed or searched for via various parameters, such as artist, album, genre, playlist, or record label. Users can create, edit and share playlists, share tracks on social media, and make playlists with other users. Spotify provides access to over 30 million songs.
In December 2012, Spotify introduced a "Follow" tab and a "Discover" tab, along with a "Collection" section. "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. Users can add all tracks to a "Collection" section of the app, rather than adding to a specific playlist. 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.
In May 2015, Spotify announced a new Home start page that would serve up recommended music, with recommendations improving over time. The company also introduced "Spotify Running", a feature aimed at improving music while running with music matched to running tempo, and announced that podcasts and videos ("entertainment, news and clips") would be coming to Spotify, along with "Spotify Originals" content. "We’re bringing you a deeper, richer, more immersive Spotify experience", commented CEO Daniel Ek.
In January 2016, Spotify and music annotation service Genius formed a partnership, bringing annotation information from Genius into infocards presented while songs are playing in Spotify. The functionality is limited to select playlists and was only available on Spotify's iOS app at launch, being expanded to the Android app in April 2017.
In May 2017, Spotify introduced Spotify Codes for its mobile apps, a way for users to share specific artists, tracks, playlists or albums with other people. Users find the relevant content to share and press a "soundwave-like barcode" on the display. A camera icon in the apps' search fields lets other users point their device's camera at the code, which takes them to the exact content..
In October 2017, Spotify launches a new program rise to promote emerging artistis.
In July 2015, Spotify launched Discover Weekly, a weekly generated playlist, updated on Mondays, that brings users two hours of custom-made music recommendations, mixing a user's personal taste with songs enjoyed by similar listeners. In December 2015, Quartz reported that songs in Discover Weekly playlists had been streamed 1.7 billion times, and Spotify wrote in May 2016 that Discover Weekly had reached "nearly" 5 billion tracks streamed since the July 2015 launch.
In August 2016, Spotify launched Release Radar, a personalized playlist that allows users to stay up-to-date on new music released by artists they listen to the most. It also helps users discover new music, by mixing in other artists' music. The playlist is updated every Friday, and can be a maximum of up to two hours in length.
In September 2016, Spotify introduced Daily Mix, a series of playlists that have "near endless playback" and mixes the user's favorite tracks with new, recommended songs. New users can access Daily Mix after approximately two weeks of listening to music through Spotify. Daily Mixes were only available on the Android and iOS mobile apps at launch, but the feature was later expanded to Spotify's computer app in December 2016.
Spotify has experimented with different limitations to users' listening on the Free service tier.
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 free members would be limited to ten hours of music streaming per month, and in addition, individual tracks were limited to five plays. New users were exempt from these changes for six months. In March 2013, the five-play individual track limit was removed for users in the United Kingdom, and media reports stated that users in the United States, Australia and New Zealand never had the limit in the first place.
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, a feature in which users can stream music by specific artists and playlists without being able to pick which songs to hear. Mobile listening previously was not allowed in Spotify Free accounts. Ek stated that "We're giving people the best free music experience in the history of the smartphone."
Streams are in the Ogg Vorbis media format at 96 kbit/s for "Normal" quality on mobile, 160 kbit/s for "High" quality on mobile and standard quality on desktop computers and the web player, and 320 kbit/s for "Extreme" quality on mobile and high quality on desktop computers, and is only available for Premium subscribers. "Extreme" quality is not available in Spotify's web player.
Spotify allows users to add local audio files for music not in its catalog into the user's library through Spotify's desktop application, and then allows users to synchronize those music files to Spotify's mobile apps or other computers over the same Wi-Fi network as the primary computer by creating a Spotify playlist, and adding those local audio files to the playlist. Audio files must either be in the .mp3, .mp4 (.mp4 files that have video streams are not supported), or .m4p media formats. This feature is available only for Premium subscribers.
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, a well-established Internet distribution system, served as an alternative that reduced Spotify's 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."
Spotify is available in most of Europe, the Americas, Australia, New Zealand, and is available in various Asian countries and territories.
The country list includes Andorra, Argentina, Australia, Austria, Belgium, Bolivia, Brazil, Bulgaria, Canada, 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, Thailand, Turkey, the United Kingdom, the United States and Uruguay.
History of expansion
Spotify went live (by invitation only) in Scandinavia, the United Kingdom, France and Spain in October 2008. Spotify launched in the United Kingdom in February 2009. It launched in the Netherlands in May 2010, in the United States in July 2011, in Denmark in October 2011, in Austria, Belgium, and Switzerland in November 2011, followed by Germany in March 2012, Australia and New Zealand in May 2012, and Ireland and Luxembourg in November 2012. The expansion continued with Italy, Poland, and Portugal in February 2013, Mexico, Hong Kong, Malaysia, Singapore, Estonia, Latvia, Lithuania, and Iceland in April 2013, Argentina, Greece, Taiwan, and Turkey in September 2013, 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. 2014 saw the service launch in the Philippines in April, Brazil in May, and Canada in September. In 2016, Spotify launched in Indonesia in March, and in Japan in September. In 2017, Spotify launched in Thailand in August.
Spotify was developed in 2006 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". Spotify Sweden AB, headquartered in Stockholm, Sweden, handles research and development. The company is a subsidiary of Spotify LTD, a company headquartered in London, United Kingdom, which in turn is a subsidiary of Spotify Technology SA, headquartered in Luxembourg. Spotify has offices in 20 countries as of November 2016.
Launch in 2008
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.
In February 2009, Spotify opened public registration for the free service tier in the United Kingdom. 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. 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.
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. 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.
In June 2012, Soundrop became the first Spotify app to attract major funding, receiving $3 million from Spotify investor Northzone. In March, Spotify removed all limits on the free service tier dropped indefinitely. In April, 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. In November, Spotify began rolling out a web player, which "looks a lot like its desktop counterparts on Mac and Windows", required no app installation.
In June 2014, Spotify released a new Web API that allowed third-party developers to integrate Spotify content in their own web applications. In October, Spotify discontinued its Spotify Apps functionality, stating that its new APIs for the Spotify web player fulfilled 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".
In April 2016, Ek and Lorentzon wrote an open letter to Swedish politicians demanding action in three areas that they claimed hindered the company's ability to recruit top talent as Spotify grows, including access to flexible housing, better education in the programming and development fields, and stock options. Ek and Lorentzon wrote that in order to continue competing in a global economy, politicians needed to respond with new policies, or else thousands of Spotify jobs would be moved from Sweden to the United States.
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 Farbman 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."
In February 2017, Spotify announced a major expansion of its U.S. operations in Lower Manhattan, New York City, at 4 World Trade Center, into one of its largest operations worldwide, adding approximately 1,000 new Manhattan jobs and retaining 832 existing positions. The company's current U.S. headquarters are located in New York City's Flatiron District.
In March, Spotify announced a partnership with the South by Southwest (SXSW) conference for 2017, presenting specific content in special playlists through a SXSW hub in Spotify's Browse tab in the mobile and desktop apps. The integration also enabled Spotify within the SXSW GO app to help users discover and explore artists performing at the conference. Two more partnerships were announced in March; one with WNYC Studios, and one with Waze. The WNYC Studios partnership will bring various podcasts from WNYC to Spotify, including Note To Self, On the Media and Here's the Thing. Spotify also announced that the third season of WNYC Studios' 2 Dope Queens podcast will premiere with a two-week exclusivity period on the service on 21 March 2017. The podcasts will be available for all Spotify Free and Premium users. The Waze partnership will allow Android app users to view directions to destinations within the Spotify app, and access their Spotify playlists through the Waze app.
In June 2017, Variety reported that Spotify would announce "Secret Genius", a new initiative aimed at highlighting songwriters and producers, and the effect those people have to the music industry and the artists' careers. The new project, which will feature awards, "Songshops" songwriting workshops, curated playlists, and podcasts, is an effort to "shine a light on these people behind the scenes who play such a big role in some of the most important moments of our lives. When the general public hears a song they automatically associate it with the artist who sings it, not the people behind the scenes who make it happen, so we thought the title Secret Genius was appropriate", Spotify's Global Head of Creator Services Troy Carter told Variety. The first awards ceremony will take place in late 2017, and is intended to honor "the top songwriters, producers and publishers in the industry as well as up-and-coming talent". Additionally, as part of "The Ambassador Program", 13 songwriters will each host a Songshop workshop, in which their peers will collaboratively attempt to create a hit song, with the first workshop to take place in Los Angeles sometime in June 2017.
In August 2017, Spotify was the most downloaded music app in the United States.
In November 2017, Spotify announced it had acquired online recording studio Soundtrap for an undisclosed amount.
In October 2015, "Thinking Out Loud" by Ed Sheeran became the first song to pass 500 million streams. A month later, Spotify announced that "Lean On" by Major Lazer and DJ Snake featuring MØ was its most streamed song of all time with over 525 million streams worldwide. In April 2016, Rihanna overtook Justin Bieber to become the biggest artist on Spotify, with 31.3 million monthly active listeners. In May 2016, Rihanna was overtaken by Drake with 3.185 billion total streams. In December 2016, Drake's just-under 26 million monthly listeners were overtaken by the Weeknd's 36.068 million. Later that month, Drake's song "One Dance" became the first song to hit 1 billion streams on Spotify. Upon its release in August 2017, the single "Look What You Made Me Do" by Taylor Swift earned over eight million streams within 24 hours, breaking the record for the most first-day streams for a track.
In March 2011, Spotify announced a customer base of one million paying subscribers across Europe, and by September 2011, the number of paying subscribers had doubled to two million. In August 2012, Time reported 15 million active users, four million being paying Spotify subscribers. 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. By March 2013, the service had 24 million active users, 6 million being paying subscribers, which grew to 40 million users (including 10 million paying) in May 2014, 60 million users (including 15 million paying) in December 2014, 75 million users (20 million paying) in June 2015, 30 million paying subscribers in March 2016, and 40 million subscribers in September 2016. In June 2016, Spotify had over 100 million monthly active users.
As of June 2017, Spotify has over 140 million active users, and as of July 2017, it has over 60 million paying subscribers.
Initial public offering
According to TechCrunch, Spotify was planning to launch on the stock market in 2017, but is instead planning on doing the IPO in 2018 in order to "build up a better balance sheet and work on shifting its business model to improve its margins". As part of its efforts to renegotiate new licensing deals with music labels, Financial Times reported in March 2017 that Spotify and major record labels had agreed that Spotify will restrict some newly released albums to its Premium tier, with Spotify receiving a reduction in royalty fees to do so. Select albums would be available only on the Premium tier for a period of time, before general release. The deal "may be months away from being finalized, but Spotify is said to have cleared this particular clause with major record labels". New reports in April confirmed that Spotify and Universal Music Group had reached an agreement to allow artists part of Universal to limit their new album releases to the Premium service tier for a maximum of two weeks. Spotify CEO Daniel Ek commented that "We know that not every album by every artist should be released the same way, and we’ve worked hard with UMG to develop a new, flexible release policy. Starting today, Universal artists can choose to release new albums on premium only for two weeks, offering subscribers an earlier chance to explore the complete creative work, while the singles are available across Spotify for all our listeners to enjoy". It was announced later in April that this type of agreement would be extended to indie artists signed to the Merlin Network agency.
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". In June 2015, Spotify acquired Seed Scientific, a data science consulting firm and analytics company. In a comment to TechCrunch, Spotify said that Seed Scientific's team would lead an Advanced Analytics unit within the company focused on developing data services. In April 2016, Spotify acquired CrowdAlbum, a "startup that collects photos and videos of performances shared on social networks", and would "enhance the development of products that help artists understand, activate, and monetize their audiences". In March 2017, Spotify acquired Sonalytic, an audio detection startup, for an undisclosed amount of money. Spotify stated that Sonalytic will be used to improve the company's personalized playlists, better match songs with compositions, and improve the company's publishing data system. Spotify also acquired MightyTV later in March, an app connected to television streaming services, including Netflix and HBO Go, that recommends content to users. Spotify will mainly be using MightyTV to improve its advertising efforts on the free tier of service. In April 2017, Spotify acquired Mediachain, a blockchain startup with several technologies that can aid Spotify's effort in connecting artists and rights-holders with the tracks on its service. In May 2017, Spotify acquired artificial intelligence startup Niland, and will use its technology to improve its personalization and recommendation features for users.
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. The new service launched on 30 March 2015.
Dispute with Apple
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 have required users to visit Spotify's website to start a subscription, bypassing Apple's system and therefore reducing the monthly subscription cost for users. In a letter to Apple general counsel Bruce Sewell, Spotify general counsel Horacio 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."
Sewell responded to the letter: "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." Apple stated that Spotify was trying to ask for user emails with the intention of moving purchases online, which led to the update's rejection.
In August, Bloomberg reported that Spotify was deliberately making the music of artists who released first on Apple Music harder to find on Spotify. The report cites unnamed sources who said 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.
In May 2017, the Financial Times reported that Spotify, along with music streaming service Deezer, start-up investor Rocket Internet, and several other companies had filed a letter with the European Union's anti-trust body vaguely accusing Apple and Google for "abusing their “privileged position” at the top of the market", by referring to "some" companies as having "transformed into "gatekeepers" rather than "gateways."" The report further notes that the European Union is considering an independent dispute settlement body that would be tasked with handling disputes between major corporations and smaller competitors. The complaint lead to the European Union announcing that it will prepare an initiative by the end of 2017 for a possible law addressing unfair competition practices.
Pat McGrath Labs and Merchbar
Spotify, together with the music streaming industry in general, faces criticism from some artists and producers, claiming they are being unfairly compensated for their work as music sales decline and music streaming increases. Unlike physical sales or 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.
The variable (and some say unsustainable) nature of this compensation, has led to criticism. Most notably, Taylor Swift's discography has been pulled from Spotify, with Swift stating: "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."
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 into the paid subscription.
Explicit content filter
Spotify is one of the few music streaming services that does not allow users to filter explicit content, which Rick Broida of CNET writes "may prevent users from opting into Spotify's Family Plan subscription offering".
Music library limit
Spotify limits users' music libraries to 10,000 songs. This has caused negative publicity on several occasions and "years of user complaints". Derek Mead of Motherboard wrote in March 2016 that the limit was "insane", and suggested that Spotify, after raising "another billion dollars" in funding, should "fix the service's most asinine limitation". Chris Welch of The Verge wrote in May 2017 that "It’s time for Spotify to stop capping how much music you can save", further questioning "Why is there such an arbitrary cap?" Welch's article also highlighted the "thousands of votes from users" on Spotify's community forum asking for a higher limit, and attached a reply from a company representative, stating "At the moment, we don’t have plans to extend the "Your Music" limit. The reason is because less than 1% of users reach it. The current limit ensures a great experience for 99% of users instead of an "OK" experience for 100%".
Spotify has been accused of failing to compensate artists fairly.
In a 2009 Guardian article, Helienne Lindvall wrote about why "major labels love Spotify", writing that the labels receive 18% of shares from the streaming company—something that artists themselves never actually 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)." 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".
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. According to an infographic by David McCandless, an artist on Spotify would need over four million streams per month to earn the U.S. minimum monthly wage of $1,160. In October 2011, U.S. 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."
In March 2012, Patrick Carney of The Black Keys said that "Spotify isn't fair to artists", 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." Replying to Spotify board member 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." 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."
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." 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. In July 2015, Neil Young removed almost all of his music from Spotify and other streaming services, citing low sound quality as the primary reason. He stated that he did not think his fans deserved the low quality they were receiving, and said it was bad for his music. Young's music has since returned to Spotify and other streaming services.
Support from labels
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, the revenue per user 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. "The thing about ‘Spotify doesn’t pay artists enough’—Spotify doesn’t pay artists... They pay labels", said Caldas.
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. 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".
In February 2015, Music Business Worldwide reported on a French study between music trade body SNEP and EY that concluded that major labels kept 73% of Spotify Premium payouts, while writers/publishers received 16%, and artists received 11%. Mike Masnick of Techdirt wrote: "Sure, in the past, it may have been reasonable for the labels to take on large fees for distribution, but that's when it meant manufacturing tons of plastic and vinyl, and then shipping it to thousands of record stores around the globe. In this case, there's no manufacturing, and distribution is an "upload" button.
D. A. Wallach
In February 2012, Forbes reported on "Spotify's secret weapon": musician D. A. Wallach, member of the band Chester French and former Harvard classmate of Mark Zuckerberg. He acts as Spotify's "artist-in-residence" and helps Spotify "brainstorm artist-friendly applications that can be carved from the gusher of data it collects". One such application includes geographical data of which cities listen to artists' music the most as suitable tour locations. He told Forbes:
We're working very carefully to make Spotify the most artist-friendly company that has ever existed. ... We’re very interested in a high level of letting artists directly connect to their fans and manage that relationship and deliver value to their fans, and vice versa. We want to do that really elegantly, at a scale that has never existed before.
In a June interview with Hypebot, Wallach reported that $180 million of royalties was paid out in 2011 and 70% of Spotify's revenue consisted of royalty payments. Spotify's growth meant that the per-stream royalty rate doubled between the service's inception and mid-2012. He said that, at the time, compared to iTunes, the average listener spends $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."
In July 2013, Radiohead singer Thom Yorke and producer Nigel Godrich removed their band Atoms for Peace and Yorke's solo music from Spotify. In a tweet, Yorke stated: "Make no mistake—new artists you discover on #Spotify will not get paid. Meanwhile, shareholders will shortly be rolling in it. Simples." 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." He described Spotify as "the last desperate fart of a dying corpse". Spotify responded in a statement that it 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 it is "100% committed to making Spotify the most artist-friendly music service possible, and are constantly talking to artists and managers about how Spotify can help build their career".
In 2015, Brian Message, partner at Radiohead's management company Courtyard Management, stated that he disagreed with Yorke, noting that Spotify pays 70 percent of its revenue back to the music industry. He said that "Thom's issue was that the pipe has become so jammed ... We encourage all of our artists to take a long term approach ... Plan for the long term, understand that it's a tough game. Find your team players, choose them carefully, and stick with them even when things are not going so well."
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 no agreement was reached. Spotify spokesperson Jonathan Prince stated: "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."In Rainbows, the only other Radiohead album not previously available on Spotify, was added on 10 June 2016.
On 3 November 2014, singer-songwriter, and recording artist Taylor Swift's entire discography was removed from Spotify. Swift had previously delayed the streaming of her 2012 album, Red. Swift stated: "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." Earlier, in July 2014, she wrote an article in The Wall Street Journal, in which she stated: "Music is art, and art is important and rare. Important, rare things are valuable. Valuable things should be paid for. It's my opinion that music should not be free, and my prediction is that individual artists and their labels will someday decide what an album's price point is. I hope they don't underestimate themselves or undervalue their art."
Spotify launched a social media campaign to persuade Swift to return and, in a statement on its website, claimed that nearly 16 million of over 40 million users had played her music in the preceding 30-day period.
In response to Swift's statement that music should be paid for, Spotify CEO Daniel Ek wrote: "Taylor Swift is absolutely right; music is art, art has real value, and artists deserve to be paid for it. ... At our current size, payouts for a top artist like Taylor Swift (before she pulled her catalog) are on track to exceed $6 million a year." However, Scott Borchetta, CEO of Big Machine Records (Swift's label), disputed those figures, and claimed that Swift had received "less than $500,000" in the past 12 months of domestic streaming of her songs. A Spotify spokesperson further disputed those numbers, telling Time that the total payout for Swift's streaming was $2 million globally.
Ben Popper of The Verge wrote in an article that "all these numbers could be accurate without conflict. Borchetta was looking to cherry-pick the smallest possible figure, so he went with $500,000, which is what Spotify paid for Taylor Swift streams in the US. But that's only one of its markets, and it's not even its largest. Globally, Spotify paid Swift $2 million over the last year." Regarding the $6 million figure, Popper further wrote: "As more people sign up for Spotify and Taylor Swift continues her march towards infinite popularity, the amount she is getting paid is increasing. [Ek] took her trend line and ran it forward a year to get to the highest possible number he could quote."
According to Borchetta, the amount Swift earned from streaming her videos on Vevo 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."
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 Records] 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."
In November 2014, Borchetta stated in a radio interview that "If this fan went and purchased the record, CD, iTunes, wherever, and then their friends go, 'Why did you pay for it? It's free on Spotify', we're being completely disrespectful to that superfan."
In an interview with Music Week in November 2016, Spotify's UK head of content programming George Ergatoudis stated that "Nothing's guaranteed, but I met up with [Big Machine Records president/CEO] Scott Borchetta personally and had that conversation with him. It's not a lock-in, but I've got every reason to be very optimistic Taylor Swift will be coming back to Spotify. I'm not saying it's done, but the indications are good, put it like that".
Swift collaborated with Zayn Malik for the song I Don't Wanna Live Forever for the movie Fifty Shades Darker. The song, released in December 2016, was withheld from Spotify for one week after its original release on competing streaming services.
In June 2017, it was announced that Swift's full catalog would be released on all streaming services, including Spotify. On social media, Swift's management team stated: "In celebration of 1989 selling over 10 million albums worldwide and the RIAA's 100 million song certification, Taylor wants to thank her fans by making her entire back catalog available to all streaming services."Rolling Stone questioned whether the move to allow her music on all streaming services was permanent or temporary. On August 25, 2017, Swift released her single "Look What You Made Me Do". The single was serviced to Spotify immediately following release.
Content withdrawals and delays
Spotify states in its support pages that: "We want all the world’s music on Spotify. However, some artists and tracks are not currently available. Sometimes agreements can’t be reached with the artist or label, or a change may happen in music ownership." Furthermore, in its apps, Spotify states a message for unavailable content: "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."
In December 2015, Coldplay withheld A Head Full of Dreams from Spotify until one week after its release, citing that all music on Spotify is available to both paid and free users. Coldplay previously delayed their album Ghost Stories from all streaming services for four months after CD, vinyl and download release, and did the same with its earlier album Mylo Xyloto.
Beyoncé's self-titled album was not available until 24 November 2014, nearly a year after its original release.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 free users. Spotify declined her offer to avoid creating separate catalogues for subscribers and non-subscribers. The album, originally released in January 2011, became available to stream 17 months later in June 2012. In November 2015, the singer confirmed that her new album, 25, wouldn't be available for streaming on any service. In a series of interviews with Time, Adele stated: "I know that streaming music is the future, but it’s not the only way to consume music. ... I can’t pledge allegiance to something that I don’t know how I feel about yet." However, the album was made available for streaming seven months later, in June 2016.
Several bands from the 1960s and 1970s delayed their work being made available on Spotify or any streaming services. Until the end of 2013, Led Zeppelin's music was not available, before the parties reached an agreement in December. In 2015, AC/DC and The Beatles allowed their music on streaming services.
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."
In February 2017, Prince's music produced under the Warner Bros. label, including the albums 1999, Purple Rain, Dirty Mind, and Sign o' the Times, became available on Spotify and other streaming services.
In April 2017, rapper Jay Z, part-owner of streaming service Tidal, pulled his music catalog from Spotify and Apple Music. This was the third time the artist removed his albums from competing services, following the release of his debut album Reasonable Doubt, and later The Blueprint.
2009 security breach
In March 2009, Spotify warned users that a security flaw discovered and fixed in December 2008 was more serious than previously thought, having compromised the password hashes of individual users in Spotify's pre-December 2008 customer base, as well as potentially "registration information such as your email address, birth date, gender, postal code and billing receipt details". Credit card information was not exposed, due to being handled by a secure third-party provider. Spotify advised users to change their passwords, especially in cases where the same password was used for multiple sites.
2011 PC malware reports
In March 2011, Spotify temporarily removed display advertising on its computer software, after reports from users on the free service tier that a malicious advertisement had infected their systems. Then-named security firm Websense stated that the attack used the Blackhole exploit kit. Spotify said in a statement that "Users with anti-virus software will have been protected", and "We sincerely apologise to any users affected. We'll continue working hard to ensure this does not happen again and that our users enjoy Spotify securely and in confidence".
2013 playlist copyright lawsuit
2014 security breach
In May 2014, Spotify announced it had been hacked, but stated that only one user's information was accessed. It released a new Spotify app on the Android platform, replacing the former app, with Spotify chief technology officer Oskar Stål writing in a blog post that the upgrade was "a necessary precaution" and that no action for apps on other platforms were necessary.
On Twitter, Spotify CEO Daniel Ek wrote that "[...] I'd argue it's a nice thing that I can upload a photo to my playlist to personalize it." This was followed by an apology on the Spotify blog by Ek, in which he wrote that "We should have done a better job in communicating what these policies mean and how any information you choose to share will – and will not – be used", along with details on what features the permissions would enable.
2015 Pay for Play practice
In August 2015, Billboard reported that Spotify was among the streaming services influenced by "pay for play", in which labels pay for songs to be placed on popular playlists followed by many users. Daniel Glass, executive of Glassnote Records, stated that playlist promotion was "a very, very big deal". Billboard referenced an August 5 practice, in which Universal Music Group hired Jay Frank as its Senior Vice President of Global Streaming Marketing, followed by an investment in Frank's marketing firm DigMark, "an innovator" in pay-for-play practices that charges clients US$2,000 for a six-week campaign. The price goes up for playlists followed by more users, up to US$10,000. "For a while, Spotify didn't take a view", on the practice, according to a music label executive, but its then-new Terms of Service agreements would "[take] a stand against commercializing accounts and playlists by rank-and-file users", as well as prohibit the practice of "accepting any compensation, financial or otherwise, to influence ... the content included on an account or playlist". However, Billboard wrote that "policing, let alone enforcing, these terms could be difficult", adding that loopholes can still be exploited to continue the practice.
2016-17 "fake artists" controversy
In August 2016, Music Business Worldwide reported that Spotify had begun paying producers to create music and placing the tracks on highly followed and popular playlists on the service. The production of the music, reportedly paid for by Spotify, was published on the service using fake artist names, and the motivation behind the practice reportedly due to creating tracks to "quality control" the mood of specific playlists and gain more favorable royalty rates than major and independent labels offer. However, the implications of the practice meant certain rightsholders who normally earned decent payouts from being featured on such playlists were excluded. After being mentioned in an article by Vulture in July 2017, a Spotify spokesperson told Billboard that "We do not and have never created 'fake' artists and put them on Spotify playlists. Categorically untrue, full stop [...] We pay royalties -- sound and publishing -- for all tracks on Spotify, and for everything we playlist. We do not own rights, we’re not a label, all our music is licensed from rightsholders and we pay them -- we don’t pay ourselves". However, in another report, the Music Business Worldwide publication discussed the situation, including the artists' lack of social media profiles, lack of managers, lawyers and industry relationships, the listing of owning all their own rights, the lack of appearance on other streaming services, Spotify's denial to comment regarding questions of the artists' frequent placement on playlists, royalty rates and recommendation origins, and anonymous comments from "very senior figures in the music business" with alleged knowledge of the practice. The publication listed 50 of the top artists under suspicion, and asked them to contact the publication to verify their authenticity, adding that "We’re pretty sure A&R teams from across the globe would love to hear about artists with no online presence who have managed to rack up millions of Spotify plays with their first few tracks".
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