How Spotify, at 10, Is Transforming the Music Business


Spotify artists

Since launching in Sweden in October 2008, the 10-year-old Spotify has up-ended the global music industry, turning streaming music into a must-have service and proving that ownership of music is firmly a thing of the past.

Its mission is simple: “To unlock the potential of human creativity—by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it.”

Today, Spotify is the world’s most popular music streaming service with a library of 35 million songs and a community of 180 million users, including 83 million Spotify Premium subscribers, in 65 markets. “We are the largest driver of revenue to the music business today,” it proudly proclaims.

Its popularity is due, in large part, to a platform-agnostic model and diversity of third-party hardware integrations—not to mention making everyone a DJ, with more than 2 billion playlists created to date.

Spotify IPO - CEO Daniel Ek

“We know that listeners stream different kinds of music at different times, in different places, and most importantly, on different devices,” Spotify CEO Daniel Ek recently stated. “We think music should be easy to access on all of your devices—and we want it to be seamless to switch from one device to another.”

“One of our key strategic objectives is to be ubiquitous on all platforms,” Ek told analysts in July. “Music is one of those things that are used not just in your home, like video, but really on mobile, in your car and in home. So our strategy is to look at all the major platform, try to make sure that we have a best in class experience and all of those platforms work with the platform providers of those to enable that experience.”

“And we’re seeing great results in the home and particularly in the connected speaker segments. It’s still a pretty early market, I would say, and then just specifically to address the car (market), that’s a longer term investment from our perspective. We are both working with manufacturers …so that you can connect your phone via Bluetooth and of course we are a huge part of Android Auto, which is Google’s car initiative, and CarPlay, which is Apple’s car initiative. So this is part of our overall strategy of being in all places where people might want to have music.”

Its quest for ubiquity is paying off. Analysts expect Spotify to generate more than $6 billion this year, 90% from subscriptions and 10% from advertising. Its IPO in April was so successful that Spotify ended its first day as a public company with a $26 billion valuation, making it one of the biggest tech IPOs in history.

As Fast Company notes, “To vanquish rivals and make good on the promise of its high market cap, all Spotify has to do is continuously improve its best-in-class product, mollify music artists and labels who are still skeptical about the shift to streaming (despite the fact that the company has distributed almost $10 billion in licensing fees across the industry), and attract enough new customers to turn around its negative economics.”

Part of mollifying artists includes giving them access to data and analytics. As Ek told analysts in July, one of “the key objectives that we’re pursuing is taking the data and insights that we’re generating on our platform and creating tools that allow artists and labels to better market themselves in the marketplace.”

Playlists are a key differentiator for Spotify. In 2013 the company bought a small Swedish firm called Tunigo that was generating human-created playlists defined by activity rather than genre: music for studying, music for cooking, music for a sunny day or a cloudy one.

Spotify has become a personal DJ for users and a boon for creatives, with Spotify for Artists enabling musicians to access data on who is listening to them and to personalize their brand persona.

“We’re really building a two-sided marketplace that provides tools and services for labels and artists to focus on promotion and marketing, and as a platform we have always licensed music from rights holders, both large and small and we will continue to license music from whomever owns the rights,” Ek told analysts this year. “And we have been doing this for years because our goal is to get as much music onto the Spotify platform as we possibly can.”

“The long-term success metrics for this platform is growing the number of creators on our platform, growing the number of creators using our promotion marketing and career management tools. And three, the number of artists and labels paying us to use those tools and services,” he added.

To that end, the company has struck direct, non-exclusive licensing deals with a small number of independent artists, avoiding major labels. “Licensing content does not make us a label, nor do we have any interest in becoming a label,” Ek told the New York Times. “We don’t own any rights to any music, and we’re not acting like a record label.”

While music is still the vast majority of all listening on its platform, Spotify is busy growing its podcast platform. As Ek told analysts in July, “We’re very encouraged with the growth of podcasts, this is growing really, really fast. But obviously from a small base today. It’s unclear long-term how big that opportunity is, so I think everyone in the entire industry is trying to figure that out.”

“But we’re certainly of the belief that it’s going to be a significant portion of what we do going forward and are investing to make both the product experience better and driving the number of creators on board at our platform.”

Turner, for example, is bringing more than 60 podcasts including CNN’s “Anderson Cooper 360” and Bleacher Report’s “Simms & Lefkoe Podcast” to Spotify.

“[There are] podcasts to support TV shows and [we’re] also exploring the idea of developing new IP and acquiring new shows that could perhaps be big in podcasts and make it to TV,” said Turner Podcast Network VP and GM Tyler Moody.

“The Joe Budden Podcast” was released in September and follows in the vein of “Ebb & Flow” which has a hip-hop focus. “Amy Schumer Presents: 3 Girls, 1 Keith” and Digital Music News’s new podcast are also on board.

Device integration is also key to its growth. Spotify and Samsung are partnering to make the music-streaming leader the “go-to music service provider” for Samsung devices, a partnership that saw its shares jumped 5% on the news.

Samsung’s Spotify plans include integrating its virtual assistant Bixby and its Galaxy Home smart speaker—and soon, access via a Samsung smart refrigerator.

“Spotify Technology is poised to become the ‘primary platform’ to connect music fans and artists,” an analyst told Barron’s. “We see great monetization potential for data, analytical tools, tour marketing and support, ticketing, merchandise sales and other ways that SPOT can help artists and the industry.”