Now, let’s take a small step back to remember: Spotify is an advertising company. An immediate rebuttal is that a large majority of Spotify’s revenue is derived from subscriptions, not advertising. A quick flash through the company’s history could refute that point. The company’s two co-founders, Daniel Ek and Martin Lorentzon, both made their initial wealth in advertising startups. Again, to cite Spotify Teardown, the authors argue that Spotify’s initial business model of advertising was interrupted by the financial crash. This disruption saw major labels, then all still investors, push Spotify to adopt subscriptions to potentially mirror the recession resiliency of television subscriptions. Thus, Spotify, as noted earlier, turned to telecoms. A decade later, that tension remains within the company, as its reliance on family bundles and cheap international promotional efforts only further hurts the amount of money labels can make.
That’s why it’s worth not thinking of Spotify’s subscriptions as offering corporate autonomy like a Patreon-backed project. Instead, Spotify still serves the purpose of being an advertising platform. (Netflix exists in a similar space, where even with well over a hundred million paying subscribers it’s
still figuring out how best to interact with brands.) That isn’t only limited to brands but also to music itself, which is why in Spotify’s
most recent deal with Universal Music Group, the headline-grabbing takeaway was for increased marketing efforts. Or one can look at the lengths Spotify’s gone against stream fraudsters or even
ad blockers. Its own devaluing of a subscription price is okay but attempting to avoid seeing a Lady Gaga ad is unacceptable.
This is why Daniel Ek has for years
huffed the fumes of radio advertising money as what will really make his company sustainable. Again, even though Spotify could potentially reorient itself towards isolating out the influence of advertising, it is embracing them. That’s why the company keeps leaning on
new video formats,
digital experiences, and whatever might force a brand to spend a few more dollars on ad spend. Potential new formats and higher ad buys are constantly being trodden out, while the
company still refuses to budge on its current $9.99 subscription price. That refusal to move on subscription price should be challenged more. Nell Jones recently
wrote in the Duke Journal of Economics that according to her research, music fans would be willing to pay
$14.40 a month for streaming access. Spotify, and in many ways artists, are held back from further experiments in this space due to Apple, Amazon, and Google being capable of withstanding loses from cheaper subscription fees.
Podcasts fit neatly into this plan since they
hopefully won’t be encumbered by major label and publisher deals, and they can, like Google or Facebook, hold more sway over how much money is being funneled towards creators. The public displays of outrage or frustration between major labels and Spotify are often needless public theater since major labels are showing they can even
survive a pandemic without the recorded music industry collapsing into itself.
Spotify isn’t alone in world audio. Apple podcasts are still huge, SiriusXM
bought Stitcher this year, and iHeartMedia is still finding new
podcast partnerships. Matthew Stoller
argued that Spotify is trying to position itself as the Google or Facebook of eventual audio advertising like those companies did for internet advertising. An astute observation and one that should inspire further government oversight over this industry before online audio shrinks into an unmovable oligopoly. A decade of waiting for Spotify to turn into a profitable business in a way limits our understanding of how much success it has actually achieved so far. It’s one of the world’s largest audio-focused platforms and there’s no reason to wait for its billionth user to put it under more regulatory scrutiny now. Soon it won’t just be artists up in arms about why Spotify isn’t paying a perceived fair wage for their labor.
Tweet
Share