Listening to music has become a part of any civilization of this era. Not only that, music has an importance in the thousands of years of history of human civilization. In the wake of this, the world has undergone a major change in the last twenty years since the advent of the Internet. The music streaming service has made a big difference in the way we can enjoy music. The beginning of this streaming service was the history of piracy. What started with piracy has turned into an 11 billion market today, occupying 56 percent of the entire industry in 2019. The company that has won this competition so far in terms of the number of customers is Spotify.
Spotify has dominated the entire music streaming world by losing to giant companies like Apple, Amazon and Google. Spotify has 130 million premium customers worldwide. However, according to the data of 2019, Spotify in the United States is still satisfied with the number two place behind Apple. In recent times, Spotify has made a number of decisions to capture their market share. For example, they bought the rights to comedian Joe Rogan’s hugely popular podcast. Again, Kim has signed deals with Kardashian and DC Comics. Their motive behind all this is to come out of the confines of the music world and want to be a giant of the entire audio industry. Spotify’s Chief Content Officer Don Astroff said:
The companies that we bought and the talent that we have brought onto the platform will help us become the number one audio platform in the world.
As a result of Covid-19, the global epidemic has also contributed to Spotify’s customer growth. Many people have turned to the Internet as a result of this epidemic. Spotify was no exception. However, there are also allegations against Spotify for not paying a fair share of the profits to the artists.
Entertainment has changed a lot since the Internet, but it has never had a conflicting relationship with anyone like the music industry. In the nineties, CDs were the main means of selling and listening to music. At the time, computers were reaching people’s homes and most of them had CD drives built-in. As a result, it was easy to buy a CD of your favorite song and play it on your computer. Platforms like Napster and Limeware came up with ways to share songs. But, it opened a big door of piracy.
Following the success of iTunes and the iPod, Apple decided in 2003 to sell digital music. As a result, they had the opportunity to build a strong position in the industry by eliminating piracy. And they succeeded. They started selling songs online by removing platforms like Napster. At first, however, many doubted whether people would spend 99 cents on each song. But Apple’s success was so great that they somehow managed to sell all other ways to sell music. Even music stores were closing. Such a change was a big shock for the entire music industry.
Usually, a CD would sell for twenty dollars, while it would cost only one dollar to make. At that time the profit was huge. From there it sold for 9.99 per album on iTunes. Thus the profits began to decline. Music lovers, who wanted to listen to free music, still liked the radio. The online radio company Pandora occupied a large part of that market. The company was founded in 2000. Ten years later, they had 47 million subscribers.
The problem is, piracy was still going on. A 2008 study found that the United States was losing 12.5 billion a year to music piracy. Although radio was a good way to go, customers could not choose the music they wanted. That place became the entrance to a small Swedish company, which we know as Spotify. Spotify co-founder and CEO Daniel Yek said,
We want music to be like water, everywhere.
Spotify was founded in 2006 and entered the United States in 2011. At first they only started as an ‘invite only’ beta program. Very quickly they were also getting good reviews. They started taking copyrights from different music companies. They were giving customers enough incentive to use the platform then. That’s when Spotify was having their hardest time.
One of the reasons for the delay in entering the US market was copyright. For 2016, Spotify had to spend 9.6 billion. Of course they knew they had to spend. To retain investors and customers, to get the right to streaming content, you have to spend money. However, once he gets the right, if the amount of customer can be increased then there is no need to look back.
In this era, it is seen that every big technology company has its own music streaming platform. Apple came out of iTunes and founded Apple Music. Amazon has created Amazon Music. Google has Google Play Music and YouTube Music. Even the famous rapper Jay-G bought shares of one of his platforms called Tidal. However, its purpose is professional sound quality. In so doing, Spotify has retained its top spot. A big reason for this is their ‘freemium’ model. Customers can listen to free music if they wish, but they also have to listen to advertisements. Those who do not want to hear the ads, they spend money to buy premium services.
At the end of 2019, Apple Music had 60 million subscribers, compared to 55 million for Amazon Music. Chinese company Tencent had 39.9 million customers. Spotify had 124 million premium customers. The free model has played a very good role behind so many premium customers of Spotify. After listening to free music for a long time, many people became interested in using the premium service. Apple, on the other hand, forces customers to pay only after the music free trial has passed. Even when Apple Music started the journey, they tried to shut down the free version of Spotify.
The free thing is definitely good for customers. This is why Spotify is so popular today. But the same thing is not good for musicians at all. What Spotify earns from advertising is much less than premium service. On the other hand, on platforms like Apple Music or Tidal, the customer has to pay. So it is difficult for an artist to make a decision. Will he pay attention to Apple Music because it is possible to make more money there? Again, Spotify has the most customers. So there is no substitute for Spotify to reach more listeners.
When Spotify began to rise in popularity, many artists wondered why they weren’t making as much profit as in the download era. In 2014, Taylor Swift famously boycotted Spotify. He removed all his songs from there. His complaint was that he and many other artists were not making enough profit for each stream. In 2015, Adele followed in his footsteps. He did not release his ‘25’ album Spotify or Apple Music.
Then came the practice of releasing albums on a single platform or not releasing an album on a streaming service for a certain period of time. The songs of many artists were not available on Spotify for a long time. Apple Music made quite a profit in this place. Later, however, Taylor Swift and Adele returned to Spotify. But streaming services faced a question: how much profit do they make to an artist per stream? Neither Spotify nor Apple has answered this question anywhere. However, experts estimate that Spotify provides 60 percent of the profits per stream.
Spotify announced in 2019 that they wanted to move away from music-based platforms to an audio platform. The reach of Spotify all over the world will increase further. At present, 90 percent of Spotify’s profits come from premium services. The remaining ten percent is from advertising. The idea of Spotify executives is that advertising has a great potential to grow their market. Podcasts can be such a medium.
Since the onset of the global epidemic, Spotify is one of the few companies that has not suffered economic losses. On the contrary, from January 2020 to June, their stock increased by 70 percent. People have turned to streaming services to pass the time as they are under house arrest.
While Spotify’s top position seems secure, competition can appear from a variety of angles. As such, Tencent has added karaoke features to their platform. Spotify needs to pay attention to such matters. There is an opportunity to focus on the other side only from the streaming platform.
It currently has agreements with the three largest record label companies, namely Sony, Universal and Warner Music Group, for all major streaming platforms. These three companies occupy 80 percent of the music world. If for some reason a music streaming platform takes the shape of a video streaming platform market, then many such platforms will suffer. Content from Netflix or Amazon is different. That is, content from one platform to another cannot be found. Because they have to deal with different production houses separately and the contracts are exclusive. That is, the same content cannot be found on other platforms. It can also happen in the music streaming market for any reason.
Whatever the competition, Spotify is a huge success story. They have to give credit for dominating the market by competing with the world’s largest technology companies. Spotify has recently launched its services in 65 new countries, including Bangladesh. Analysts are waiting to see how successful they will be in these countries.