15 Years of Spotify: How the Streaming Giant Has Changed and Reinvented the Music Industry
Ask any executive what the music business was like in the ’00s and their face may take on an expression more commonly associated with narrowly averted disasters like car accidents or, more accurately, attempted robberies. Due to peer-to-peer file-sharing platforms like Napster and Limewire, U.S. recorded-music revenues lost more than half their value in the early years of the 21st century, falling precipitously from an all-time high of $14.6 billion in 1999 to $6.7 billion in 2014 and 2015 (according to the RIAA) as songs transitioned from being sold on a physical object like a CD or vinyl to becoming a sound file that could be easily — and illegally — distributed for free. Piracy ran rampant as the music industry failed to come to grips with how quickly and drastically its world had changed. While iTunes brought some stability to a business model in freefall, in essence an entire generation grew up believing that it didn’t have to pay for music.
But streaming, led by Spotify, the brainchild of Swedish entrepreneurs Daniel Ek and Martin Lorentzon, changed all that. Founded in Stockholm on April 23, 2006, and seeking a solution to the industry’s piracy problem, the on-demand audio-streaming service was built on the understanding that consumers who aren’t inclined to buy a specific album or song might be willing to pay for ease of access to a large library of music. For a $9.99 monthly fee (or free to those who don’t mind sitting through dozens of groove-busting advertisements), the site is an open archive, easily searchable and replete with more music than anyone could play in a lifetime. The company’s U.S. launch in July 2011 opened the floodgates, and Apple Music’s streaming service debuted four years later.
How completely has streaming transformed the music world? The platform rose from 7% of the U.S. market in 2010 to a whopping 83% by the end of 2020 — and recorded-music revenues saw their fifth consecutive year of growth, topping $12.2 billion, per the RIAA. It’s no understatement to say that streaming saved the record- ed-music business, and that global market leader Spotify led the charge toward the stability and growth that the industry is enjoy- ing today. In honor of the game-changing digital service provider’s 15th anniversary, Variety breaks down 15 innovations, transformations, modifications and other ways Spotify has changed how people consume music and brought new functionalities to its platform.
Jem Aswad contributed to this report.
1. The Decline of Music Piracy
The illegal downloading and file-sharing introduced by Napster, Limewire and others led to such rampant piracy that it seemed the genie could never be put back in the bottle. Yet Spotify made legal streaming so easy that, combined with the music industry’s (at times heavy- handed) consumer awareness campaigns, new generations were taught to pay for music again, albeit at a fraction of the former price of a CD. But by that point, less was better than nothing. In a U.K. study by market researcher YouGov, music piracy fell from 18% in 2013 to 10% in 2018 — and 22% of those surveyed who illegally downloaded music said they expected to stop within five years. Indeed, a 2019 study of all online piracy by the American University International Law Review states: “Our main conclusion is that online piracy is declining. The key driver for this decline is the increasing availability of affordable legal content, rather than enforcement measures.”
2. De-Genrefication of Music
Back in the CD era, being musically adventurous was an expensive luxury: How many people paid nearly $20 for an album they ended up not liking? But subscription services enable users to explore limitless artists, genres and sounds for $10 per month. Because of this accessibility, Spotify has become a boon to experimentation for music lovers and music makers alike. Not only has streaming led to genre-fusing styles like SoundCloud rap, but a 2019 survey by research firm YPulse found that 85% of millennial Spotify users said their music tastes do not fall into one category.
3. Free Subscription Tier
For many years, Spotify was criticized for its free (aka “ad-supported”) tier, which enables users to stream as much music as they want if they’re willing to sit through advertisements. Yet Ek and reps for Spotify insisted that the free tier was an effective on-ramp for paying customers. And the company’s steady rise in paid subscribers, which passed the 155 million mark in the fourth quarter of last year (growing by 31 million over fourth-quarter 2019), suggests that their assertion was correct. The free tier also provides market research of its own: For example, in 2015, Brian Benedik, Spotify’s then-VP of North American advertising, explained that users had created hundreds of thousands of barbecue-themed playlists on the DSP, allowing the company to make more educated guesses about what products a user might want when listening to that kind of playlist — maybe an advertisement for lawn care or one for a summery, feel-good album. While the free tier is essentially a loss leader (it accounted for only 9% of Spotify’s revenue in 2020 and less than 1% of its gross profit), there’s little question that the tier has been good for the company’s overall business, and for bringing converts to streaming.
4. Mood Playlists
Not only have streaming services broken down many traditional boundaries between musical genres — they’ve recategorized many of them into “moods” via playlists that were first pioneered by Spotify. Since the early 2010s, the dedicated editorial team at the company has been making emotive and genre-less playlists, like Mood Booster, which includes happy, optimistic songs across all genres, or, more recently, Lorem, which Spotify has described as “the loose knit sweater, DIY bedroom mural wall, alt milk of playlists” (whatever that means).
Prior to the streaming era, the concept of autoplay as we know it today did not exist. Given the limited user libraries of digital download marketplaces like iTunes, there were few real ways, without the user completing a purchase to beef up their personal library, to offer new suggestions of songs. But with the rise of streaming, DSPs like Spotify could offer users more content after their current playlist or album was over, including algorithmic suggestions of new songs that fit with the playlist’s motif. Spotify became the first on-demand, audio-only streaming service to popularize autoplay, a feature that is included in all streaming services now.
6. Ending Apple’s Monopoly
With the introduction of the iPod in 2001 and iTunes two years later, Apple quickly and completely dominated the legal digital music world, holding a whopping 69% of the digital sales market in 2009. Its closest competitor, Amazon MP3, lagged far behind with only 8% of the market share during that year. But Apple’s runaway reign over digital music consumption ended in 2016 when streaming revenue finally surpassed that of digital downloads. Spotify led among streamers in the second quarter that year with 44% of the global market; Apple Music followed, with 19%. Spotify continues to hold the top spot as an audio-only DSP, maintaining 34% of the global streaming market as of the second quarter of 2020.
7. Playlist Curators Become Stars
Spotify’s team of playlist curators (known as editors) can play a large role in a song’s success: A prime spot on popular playlists like Today’s Top Hits, Rap Caviar or New Music Friday is highly coveted. One of the first such curators was Tuma Basa, founder of Rap Caviar, Spotify’s hottest hip- hop playlist, who became a minor star in his own right and left the company in 2018 for a top gig at YouTube Music. Yet Carl Chery, who replaced Basa, and Ned Monahan, who oversees Today’s Top Hits and New Music Friday, along with Antonio Vasquez for Viva Latino and Lizzy Szabo for the alt-leaning Lorem, have found themselves in a taste-making role not worlds away from the one formerly held by radio DJs. Once the most popular way of consuming music, in-car daily radio listening has fallen from 43% in 2016 to 29% in 2019 among millennials and Gen Z listeners, while streaming music daily on a smartphone has increased from 33% in 2016 to 41% in 2019 among that same demographic.
8. Your Personalized Year in Recap
Spotify became the first DSP to offer listeners a personalized year-end review of listening habits with 2015’s “Year in Music.” This was swiftly rebranded as “Spotify Wrapped” in 2016, and although the offerings have grown in number each year, the concept has remained the same: Many music fans find their social media feeds filled with friends’ “Wrapped” lists when they’re released every December. Apple Music eventually followed suit with its “Replay” feature, which debuted in 2019. Tidal joined in last year with a similar product, “My 2020 Rewind.” Featuring easy-to-share social media graphics, Spotify Wrapped provides the company with free advertising for its streaming service each December, and it pioneered the concept of sharing select data and analytics with users, providing them with insight into their own habits.
9. Songwriter and Producer Credits and Promotion
Music fans have long bemoaned the loss of liner notes, which fell by the wayside as music moved from CDs to digital platforms. That loss has been disastrous for songwriters, producers, engineers and others in the musical ecosystem whose work was previously acknowledged on album covers and CD booklets but now requires a Google search. iTunes debuted its Composer’s View feature in 2013, and Spotify also lagged behind the public’s demand for a proper crediting system — but it was still the first audio-only streaming service to implement public credits in February 2018. Since the launch of credits, Spotify has also debuted its Written By playlists to showcase the work of major songwriters and its recent Songwriters Hub. However, even though Spotify was first, Tidal, which established its first enhanced credits feature in 2019, remains the industry leader, with expansive credits that often include musicians and engineers as well as songwriters and producers.
10. The Problematic ‘Hateful Conduct’ Policy
In what may be its highest-profile public relations misfire, Spotify attempted to sanction R. Kelly as uproar around long-standing sexual-misconduct allegations against the singer peaked in early 2018. The company has long had guidelines opposing “hate content,” which it has defined as content that “incites hatred or violence against a group or individual based on characteristics, including, race, religion, gender identity, sex, ethnicity, nationality, sexual orientation, veteran status, or disability.” But when it tried to expand that definition to artists who engage in “hateful conduct” (i.e., Kelly), things got complicated. Spotify effectively banned his music from its playlists and promotion — although his albums and singles remained available on the platform — even though the singer had not been convicted of any crime. Yet music by artists with multiple felony convictions, and even convicted murderer Phil Spector, remained on its playlists. The company quickly admitted its mis-step and said it would walk back the policy, although it is apparently still in effect: In the wake of country star Morgan Wallen’s recent use of a racist term (captured on video by one of his neighbors), his music disappeared from many Spotify playlists but has quietly returned to some others.
11. Artists Can Share Their Stories
Spotify was the first streaming service to feature Stories directly on its platform — now known as Spotify Clips: Accessed by a tappable circular icon at the top left corner of playlists like Written by Mike Dean, musicians can record short videos to share and connect with fans just like on social sites like Snapchat, Instagram or Twitter. For example, veteran producer-songwriter Dean shares with interested fans the backstory of creating Travis Scott’s “Sicko Mode.” The feature, which debuted in January, is available for select creators.
12. Direct Donations
After COVID-19 devastated the live music industry, Spotify stepped in with a new feature called Artist Fundraising Pick, allowing fans to “tip” or donate directly on the artist’s page. The money amassed through this new feature could either be sent to a charity of the artist’s choosing or go directly into the artist’s pocket, providing much-needed relief during the shutdown. Though the tipping mirrors options on Chinese streaming services like Tencent’s QQ Music, Kugou and Kuwo, Spotify’s version was the first of its kind in the worldwide audio-only streaming market. The feature has drawn backlash from some musicians and critics, one of whom called the tip jar a “tacit admission that artists are not being paid enough” by Spotify itself.
13. Mini-Videos to Accompany Songs
Spotify Canvas, one of the newest contributions on this list, was premiered for some artists several years ago, but the tool just launched out of Beta in February 2021. Canvas allows artists to upload a customized 5 to 8-second video loop to accompany music’s cover art as the song plays. This interactive art lets artists offer a more nuanced portrait of their creative vision within the context of an audio-only streaming experience. Spotify has already seen impressive results with this feature: The company’s data suggests that users listening to a song with Canvas are 5% more likely to keep streaming, 20% more likely to add the song to their playlist and 9% more likely to visit the artist’s profile page.
14. Licensed Music for Podcasts
Spotify has been flirting with the concept of interwoven spoken word and music since 2019 with its playlist Your Daily Drive, a personalized selection that includes news report podcasts and songs from the user’s listening history. But Spotify’s self-owned podcast creation platform Anchor has recently unveiled a feature that allows podcasters to integrate full songs from Spotify’s library directly into their shows, with no further licensing required. Announced in October, Anchor’s latest feature is a major development for podcast creators who have long struggled with the format’s cumbersome, expensive licensing process, and allows for greater innovation in the space. Spotify refers to such content as the “future formats” of audio, enabling the creation of podcasts like guided meditations, album reviews and DJ- and radio-style shows.
15. Controversial Targeted Ads for Artists
In October 2019, Spotify launched advertising platform Marquee, the first of its kind for an audio-only streaming service. Accessible through the Spotify for Artists portal, Marquee is a sponsored recommendation tool for which a performer or their team pays Spotify for advertisements targeting users most likely to be interested in the ad. Boasting an impressive click-through rate of 20%, Marquee ads are one of Spotify’s most lucrative new revenue streams, with a rate of 55 cents per click-through. This new feature, however, has been controversial, prompting some to call Marquee a form of payola for the streaming age.