Does Spotify Have A Future?

Spotify has announced an update with features that make it easier to discover new music and track what your friends and random famous people are listening to. Will that be enough to persuade more people to actually spend money on the service — and will artists ever get paid fairly?

Main picture by Spencer Platt/Getty Images

The new features in Spotify cluster around two new tabs: Follow and Discover. The Follow tab lets you see what music others are listening to, and also track what your favourite artists are up to. Being able to get notifications when new material is released is definitely a boon.

The Discover tab highlights new music based on your existing playlists, and constantly updates depending on what you're listening to. You can also save music into a "collection" without having to assign it to a specific playlist, and check samples of new music without interrupting your current playlist. The new features will roll out into the desktop Spotify app over the next few weeks, and will hit the mobile app next year.

Spotify made a big deal of the announcement, hiring musicians for major launch events around the world. The US launch included a stupidly awkward conversation between former adversaries Sean Parker (ex-Napster, now on the Spotify board) and Lars Ulrich from Metallica, which has just licensed its music to Spotify. In Australia, video of the US launch was shown on a delayed stream, interspersed with live performances by Ricki-Lee and Paul Dempsey from Something For Kate. Both did an impressive job, especially given the early hour and the need to impress a room full of sleepy journalists. But when the music was over, I was left wondering about quite a few things.

Who's Using It?

Spotify launched in Australia back in May. Its brand is arguably the most visible amongst streaming subscription services, but it has plenty of local competitors. Its biggest advantage over most of them is that it offers a free ad-supported service, though you have to pay if you want mobile device access. But what does that mean in terms of user numbers?

Spotify won't disclose Australian subscriber numbers, but says that Australia and New Zealand was its most successful country launch ever. To put that in perspective: in the US, Spotify has 1 million subscribers, which represents just 0.3 per cent of the American population. If Spotify Australia was twice as successful, that would mean 150,000-odd people had subscriptions. That's a very generous estimate, since "launch success" doesn't necessarily mean signed-up paying subscribers. But even so, it's roughly the same number of people who purchased Karise Eden's debut album. There's a long way to go before it's the dominant means of listening to music, and no clear data on whether the associated advertising revenue will create a sustainable long-term business.

Are Artists Rorted?

One frequent criticism of Spotify is that artists don't money from it. At the launch, CEO and founder Daniel EK boasted that the company pays back nearly 70 per cent of its income to "rights holders", but that leaves a lot of unanswered questions. The rights holders are often the record labels, some of which have contracts with artists that don't require them to share streaming revenues. Even if the artist does get that money, that doesn't mean it's a large payment.

One local performer told me that Spotify pays around $5 for 10,000 streams. Even after taking out a healthy share for a record label and a digital music provider's 30 per cent tranche, you'd make the same amount of money from just 10 downloads. If every performer on Spotify is relying on that level of payment, it's going to get ugly very quickly.

Sure, you can argue that some money is better than the zero dollars you get from pirated music, and that promotion via Spotify can ultimately lead to sales of downloads or CDs or concert tickets. Making a living from music is not easy, and there's no guarantee of fairness if you pursue that path. But I can't see that Spotify is actually helping that much; it's just another symptom of the fractured entertainment industry business model. And I can't help suspecting Ricki-Lee will make more from one corporate Spotify breakfast gig than from thousands of listeners on the service.

The Future Is Unclear

Spotify founder and CEO Daniel Ek is confident that subscription streaming is the future. "There are people that are growing up to streaming music services," he said. "That's the only music they are ever going to see." Picture by Spencer Platt/Getty Images

I think the only thing that's certain about media consumption is that it will change frequently. Ten years ago, you could have made a similar comment about iPods. They haven't disappeared, but no-one thinks standalone MP3 players are the future anymore. Spotify certainly has a dominant position in the current environment, but adding social features doesn't guarantee that status for all time. Even in the streaming space, it could get blindsided by a resurgent MySpace, or if Apple decides to move into streaming. As someone who made his money before Spotify existed once said: the times, they are a-changing.

Lifehacker's weekly Streaming column looks at how technology is keeping us entertained.


Comments

    I know how to solve the artists not getting paid properly.

    How about they just get a real job, and stop trying to get famous. They take that risk when they try to get into the music industry.

    Everyone knows only a small percentage get decent money.

    You don't need to quit your day job to play an instrument or sing.

      Would you give the same advice to anyone who enjoys their job? "Oh, you enjoy it, so it's fine - you can do it for less money, or free."

      Also, it's pretty hard to run two concurrent careers. If you have a demanding day job, you're not going to be able to go on tour very easily, or devote time to writing and rehearsals that you should.

      Music is a business just like any freelance work. Artists whose products reach end users should be paid, just like in any other industry.

      It's really hard for musicians to even break even - I don't understand why you're so against them seeing a little lolly for their efforts. http://minorityfortune.com/liabilities/how-much-musicians-really-make-in-the-industry-part-i/

      Without their work, your iPod is empty.

      Last edited 07/12/12 12:46 pm

    In the last 3 months I have listened to various Alt-J songs 386 times, with a Spotify Premium subscription.

    Is that not equal to purchasing the album from iTunes, or buying the physical record?

    Firstly - congratulations to b0m8 for ignorant d!ckhead comment of the week. It's Friday arvo but you made it to the top of the list so well done champ.
    Secondly - do you still need a Facebook account to use Spotify? That's still the big roadblock for me. Having said that I haven't signed up with any other streaming service, but I have a hard drive full of music that I've ripped from CD's I've bought over the years.

      Nah you don't need facebook. I don't have it and I signed up for it just fine. You need to make a Spotify account using an email address

        How long ago was that though? AFAIK there was a cut-off point this year where Facebook for new users became mandatory, but old users were able to just keep a simple traditional login.

          I was looking at this only a couple of days ago. You can still sign up using an email address.

    Even in the streaming space, it could get blindsided by a resurgent MySpace, or if Apple decides to move into streaming.
    No mention of Xbox Music? One of the biggest tech companies in the world has their own service similar to Spotify, with apparently a bigger catalogue of songs and it doesn't get a mention?
    Spotify has 1 million users in the US, so let's put that as a a generous estimation of 15 million worldwide (almost totally pulling that estimation out of thin air though). There are already at least 40 million computers out that that have Xbox Music installed already, mind you, how many people are actually using it/know about it is the real question. Needless to say, MS will be pushing it hard if they want to take over that market. And if people's computers already have it, they'd be more likely to use that, unless they're already using Spotify heavily. So, don't go writing them off.

      Is its Australian catalogue size larger than Spotify's? At least 2/3 of albums I learn about from review sites that post Spotify links don't work outside of the US or UK.

      A lot of Spotify's streams appear to be once-offs from people sampling music. If they don't listen again then I doubt that they would have paid for the album. You may as well ask for individual revenue from every radio listener - assuming you're lucky enough to get your music onto the radio in the first place.

        Well, Xbox Music's catalogue is bigger than iTune's, at 30 million and 28 million respectively (http://mashable.com/2012/10/16/xbox-music-compared/). So I'd say maybe? They haven't said how many of those are available to specific regions though.

          I know the _global_ catalogue numbers but they're absolutely no indication as to what is available country to country. Even in Europe adjacent countries have wildly differing catalogues between these suppliers. Quite a few charting artists in UK and USA aren't even listed in Australian digital catalogues, and some labels can't be arsed licensing anything outside the USA. Xbox or iTunes could pick up a host of US-only releases and that would boost their global figures but contribute nothing in most regions.

          You can compare Spotify's country to country coverage of specific releases here: http://spotimy.co.uk/.

            Yeah. I was going more along the lines of Xbox music having 30 million compared to Spotify's 13 million may correlate to less songs not being in Australia. I have absolutely no idea though.

    Isn't the fact that artists haven't signed into a good enough contract to cover streaming music partly their fault? I think Spotify is great and I think it's a step in the right direction. Sure it's not perfect but it's better than piracy. From a business point of view, how many music related businesses do you see giving 70% back to the rights holders?

      The fact is that record labels have two hundred bands competing for every contract. Musicians don't have a whole lot of bargaining power these days, until they've already well and truly made it.

      It's not really the fault of the musicians that they're being screwed, because if they start to be 'difficult' about the terms in their contract, there are 199 other bands who would jump at the chance.

        Fair point. So who's at fault here? Sounds to me like Spotify are being blamed for the record labels acting like muppets. Spotify give 70% back to the rights holders... I think that's pretty fair.

    I like it when artists don't get paid that much... it means that to get money they need to do live shows. Any performer that has a problem with that clearly does not deserve to be in the industry! If you can't perform because you need an engineer working your AutoTune on stage with you then you can go get stuffed!

      That's a bit harsh.

      While I agree that artists should be going out to perform more, you forget that it can take a lot of money to do a tour. The best way for them to raise money to do a tour is to sell their music.

      A lot of the costs for producing music, even for musicians signed to a label, are burdens borne by the musicians themselves. Tour costs and production costs are often provided by labels as 'loans' or 'advances' against future royalties.

      It's a risky business, and you want to be pretty sure of success before you commit to a costly tour.

      +1 I don't think Artists should even regard album/download sales as a form of income at all, they should be glad that they have a platform to be heard by anyone in the world and regard any income from that distribution as more of a bonus. The majority of their income should always come from tours and live shows, because at the end of the day that what it is all about.

      Last edited 07/12/12 3:27 pm

    I've had a Spotify premium subscription for 3 months now and i love it, i use it everyday - prior to this i used to download all my music through non-legitimate means, I don't mind paying for music, but i'd rather feed my money to goats then use itunes.

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