How Spotify’s changing the production and marketing of music
By: Simon Owens
Tags: Spotify, Marketing, Music, Media, Streaming

For the first time in the 21st Century, music executives are expressing an emotion that many within the industry assumed had permanently evaporated: optimism. That’s because, after more than 15 years of declining revenue, the music industry recently saw its first gains. This can almost entirely be attributed to the rise of streaming apps like Spotify. According to the Recording Industry Association of America, music revenue increased by 16.5 percent in 2017, the second straight year of gains, with music streaming services representing two-thirds of overall revenue.

But not everyone is breaking out the champagne bottles. The industry isn’t simply reverting to its pre-2000 self — what the labels would consider the golden age before Napster gutted music sales and iTunes atomized the expensive album into its 99 cent song components, further eroding revenue. The subscription-based approach that’s been adopted by most streaming services has not only led to a change in music consumption habits, but it’s also impacted how music is produced and distributed. Unsurprisingly, industry shifts this large produce both winners and losers.

Case in point: while industry revenue is on the rise, songwriters are feeling the squeeze. A recent piece in Pacific Standard detailed the case of Andre Lindal, a songwriter who composed “As Long as You Love Me,” a pop song that was performed by Justin Bieber and subsequently hit №3 on Billboard’s Top 40 rankings.

Streaming numbers were Lindal’s friend that year, at least until he got paid. When he did, he found that the 34 million YouTube views had earned him $218, and the 38 million Pandora streams had netted him only $278. Dismayed, he sidelined his decade-long songwriting career and started a firm that develops artists as musicians and brands, which he called “a necessity, given what the songwriter income is.”

It turns out that royalty rates for songwriters were established in the early 20th Century, back when the radio was still a burgeoning medium and long before the establishment of the current music landscape. While 75 cents of every dollar Spotify generates goes to music royalties, a paltry portion of this flows toward the songwriters themselves. “The performance royalty rates paid by Spotify, YouTube, and other ‘interactive’ streaming services are actually the only form of songwriter royalty pay rates that aren’t set by the government,” wrote Pacific Standard. This means that songwriters are only receiving $90 for every 1 million streams on Spotify. Given these harsh economics, it’s becoming increasingly impossible to make a living from songwriting alone.

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Streaming apps are also changing how new music is discovered — in a way that I would argue is for the better. For several decades, whether a song became a hit was almost entirely dependent on it being discovered and played by radio DJs. This was all fine and good when there were thousands of locally-owned radio stations spread out across the U.S., which ensured multiple potential entry points for a new song, but loosened regulations in the 80s and 90s, first enacted by the FCC and further cemented into law by the 1996 Telecommunications Act, ensured a massive consolidation of media ownership that further led to a decline in music diversity across the airwaves. Before the law passed, media companies could only own a maximum of 40 stations, but the Telecommunications Act opened the doors to virtually limitless acquisitions. A 1999 article in Washington Monthly reported that, in the year following the passage of the Telecommunications Act, 2,045 radio stations were sold to larger conglomerates. Just two companies account for half of all radio station ownership.

And with the consolidation of radio station ownership came the homogenization of radio playlists. Once-independent DJs who had been accustomed to choosing their own song lineups were given corporate-approved titles to play instead. Playlist song overlap between stations owned by the same company is as high as 76 percent. This means that a very small number of radio executives are serving as the gatekeepers, determining which songs become hits and which ones fall quickly into obscurity.

Streaming apps have changed the equation considerably. Spotify playlists, which are maintained by a mixture of users, Spotify staff, and algorithms, account for the majority of music listening on the app, and there have been several cases in which a previously-unknown artist has been catapulted onto the Billboard charts after getting prime placement on one of them.

This has led to more song diversity among the top hits. An engineer named Michael Tauberg performed an analysis comparing the Billboard charts in the eight years leading up to the launch of Spotify to the eight subsequent years. “In the pre-Spotify era of the 2000s, there were a total of only 3,092 songs on the Hot-100,” he wrote on Medium. “In the same amount of time from 2009–2018, there were 3,933 songs on the chart, an increase of 27%.” Songs spent less time, on average, on the list, but that meant more artists had a shot at breaking out into the mainstream.

Of course, this hasn’t eliminated all problems pertaining to music diversity. Because a song needs to make it onto multiple influential playlists in order to achieve virality, songwriters are composing songs that can fit within several categories at once, a trend that some would argue leads to bland compositions that don’t take chances or break out of already-established genres. Also, the rising influence of playlists has resulted in the establishment of a pay-for-play black market in which the curators for influential playlists are paid off in exchange for prominent placement of a new song — something that was outlawed years ago and is against Spotify’s terms of service.

So yes, the music industry is on the upswing, but this renaissance brings with it a paradigm shift for how music gets made and how we as consumers discover it. With Big Radio no longer maintaining a stranglehold over the Billboard Top 100, we’re seeing more diversity in our music offerings, but at the same time songwriters, the lifeblood of the industry, are struggling to make ends meet. Streaming just may well save the music business, but it’s important to stay mindful of those who, without the proper interventions, could end up getting left behind.

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Simon Owens is a tech and media journalist living in Washington, DC. Follow him on Twitter, Facebook, or LinkedIn. Email him at simonowens@gmail.com. For a full bio, go here.