I never really listened to music in the past. The idea of paying hundreds of dollars, be it on iTunes or in the local CD store, for music that I would only listen to once or twice, seemed quite absurd to me. So I was immediately hooked when my friend introduced me to Spotify a few years ago. I was shocked to find out I had access to all of the world’s music at the tip of my finger – all for free! Within months, I bought a Spotify premium subscription, partly because of the extra perks I would receive, but also partly because I support Spotify: I support the idea of a platform where artists and consumers could both benefit in a world of digital piracy.
Spotify’s revenue model was criticised for its idealism and impracticality in the early days of its conception. It is literally providing free music: anyone who has a decent Internet connection is able to download Spotify and gain access to nearly any song track in the world. Given this, how would it be able to pay the hefty royalties that artists would charge for their music?
Spotify receives revenue from mainly two sources: advertisements and premium subscriptions. Free users will get banner ads across the front pages of Spotify, as well as 30-second “audio ads” that are inserted between songs.
Users who choose to “go premium”, which ranges in price from country to country (here in Hong Kong it runs HK$48 per month), not only have unlimited access to music on their smartphones, but are also able to enjoy ad-free listening and stream better-quality music at faster rates.
The company has been losing money ever since its inception, but its exponential growth in revenue suggests that this is likely to change in the future. The number of Spotify users increased from 40 million to 50 million this year, and the proportion of premium, paying users has almost doubled over the last twelve months, increasing its revenue by 72 per cent.
Yet some artists are dubious about Spotify. One of these artists is Taylor Swift, who recently announced her decision to withdraw her music, and in particular, her latest album, 1989, from the service. She stated that Spotify does not “fairly compensate the writers, producers, artists, and creators” of the music. Swift, to a certain extent, does have a point: streaming revenues aren’t likely to add up to the amount of revenue that artists used to receive when the idea of digital music was foreign and most people purchased physical copies of albums and singles. But Spotify isn’t at fault for artists’ declining revenues. Even if it (and other similar streaming platforms) didn’t exist, digital piracy and illegal torrenting of music would still drain sales. Spotify creates a win-win situation in which both artists – after all, Spotify paid $2 million to Taylor Swift over the course of last year in terms of royalties – and consumers can benefit.
Will Swift’s music ever be on Spotify again? I hope so. Payouts to artists are increasing – in fact, Swift was projected to receive US$6 million this year in royalties – and it is unlikely that any artist will be able to reject Spotify’s offers in the long run.