You’ve no doubt heard of Spotify, one of the giants of music streaming. Their rise to popularity and subscription service not only revolutionised the music industry, it grew it (after some shaky years, that is).
However, Spotify’s newest pitch has some consequences.
Spotify is asking for labels and artists to pay for song advertising on the app to grow in popularity, a feature which the service has lacked to date.
Why this sudden need for Spotify ask artists for money to be featured on their app? Ultimately, to raise their revenue. Spotify boasts approximately 120 million paying users but most of that money goes towards royalties for artists. This means the company is underperforming.
Industry analyst Mark Mulligan gave an explanation for Spotify’s newest pitch, “They need to diversify their revenue streams, they need to work out ways to drive higher operating margins.”
The streaming service have already begun solving this issue with the rollout of Marquee. For a sizeable price of $5,000 (US), artists or their label can notify followers on the app when a new release drops. You might have already seen this pop up on your phone for Justin Bieber’s album Changes or another major release such as Tame Impala’s The Slow Rush. With such a high price to enable the notification, Marquee has created a divide between smaller artists/labels and the big players such as Universal who can afford an advertising advantage such as this.
With Spotify now pitching this second tool for paid promotion; it’s likely they’ll turn a profit. The upcoming promotions and notifications could be helpful to avid Spotify listeners, but more changes like these will make it even trickier for small artists to spread their voice to the market.
Read more about streaming and revenue here.