As you may have heard, Spotify is launching will begin trading publicly on April 3. The company’s anticipated direct listing has been very important news in the music industry since its announcement, due both to the size of the company and the untraditional use of a direct listing. While this is obviously very significant for Spotify as a company, and a positive and welcomed development for their shareholders, the question has arose as to what it means for the music industry and artists?
One of the major changes in the music industry as a whole recently has been the development of streaming music services like Spotify. Despite the decline in music revenues over the past ten years, the enormous increases of music streaming as an overall percentage of music revenues has allowed the decline to stop. While some people may not have been willing to consistently pay over $100 per year for music in the past, a growing number are willing to pay Spotify $10 a month for unlimited access to millions of tracks. In fact, Spotify has reached over 70 million paying subscribers, showing that the streaming music model does have potential to dramatically increase music revenues.
One consequence of the increase in streaming music over physical or download music purchases is allowing smaller artists to develop revenues more easily, at least in some cases. When artists are able to be paid for their listens rather than being paid only when someone is willing to buy their music for a much higher cost, smaller artists are able to get paid for their music even when they couldn’t have produced and distributed physical music in the past. This does, of course, result in an increasing dependence on Spotify for music discovery that didn’t exist in this form before streaming became such a large presence.
In the past, music was distributed and discovered through marketing and publishing efforts by a number of music labels. Music streaming companies like Spotify have, through enormous reach and large amounts of control over access to listeners, been able to take control as a single company that decides what gets listened to. Spotify’s algorithm and human generated playlists have large potential to reach listeners, but also transfer the power over what gets heard into Spotify’s hands. As music listeners depend more on Spotify to help their discovery, they also relinquish some of their own control over their listening habits and let the streaming giant make those choices for them. While Spotify’s algorithms are very good at discovering what you like, and their human curators are able to effectively spread music within genres, it’s still a significant and important change to recognize.
As artists lose control over the discovery of their music, they also lose some amount of ability to be creative and unique. If Spotify only supports the discovery of your music if it conforms to the tastes they see in their listeners, artists have decreased opportunities to make their own artistic and creative choices. This might stop the music industry from being able to move forward, adapt, and change in the ways that it has been able to with more free and independent distribution models.
While some of the changes in the music industry driven by Spotify may have been more negative and weakened the ability of artists and labels to have artistic freedom and control over their distribution, they have admittedly been able to drive a massive increase in revenue. This is very positive for artists, and is a significant factor in their ability to continue to create. Spotify’s revenue goes mostly towards paying labels, which translates into revenue for artists. It’s important to remember that there are both positive and negative sides to every problem, but it’s difficult to decide which side the balance falls on in the case of Spotify. They have obviously done a lot of good in the music industry, but they have changed a lot about discovery and listening as well. Listeners might appreciate this change in some ways, but in others it restricts both the artists and the listeners.
I do, however, hope Spotify’s IPO goes well. It’s exciting to see new music companies—that have driven the recovery of revenues and accessibility in the music industry—succeeding. Spotify’s early success was driven by the industry’s need to drive off music piracy and continue generating revenues, and whatever else they may have done, this much has been successful. What are your thoughts on Spotify’s direct listing, and the changes they have made in the music industry? Leave a comment below, we’d love to hear your opinions.
[DISCLAIMER: The writer of this article, Kian Moretz, is the CTO of wave.ac, a forthcoming audio streaming and artist tools platform. In his capacity writing for Rave Advisory, he is not writing with the intent to harm or otherwise negatively affect the works and services of Spotify, but to offer his independent opinion through his work in the music industry. Moretz does not have any shares in Spotify Technologies (SPOT) or wave.ac.]