Spotify is celebrating it’s first year in the U.S. since being introduced last July by the Swedish music streaming service, Spotify AB. Post-introduction, the sleek product has been highlighted in the public eye, generating success with its tantalizing features and developing controversy regarding its cannibalistic nature towards the artists that build the very foundation of the product.
Music on Spotify can be browsed by artist, album, record label, genre or playlist, and new users can begin a six month free trial upon initial login with a Facebook account. This allows users to listen to unlimited amounts of streamed music with occasional radio-style advertisements. After six months users are subjected to a listening limit of ten hours per month, though an “Unlimited” subscription for $4.99 per month removes advertisements and time limits and a “Premium” subscription for $9.99 per month introduces mobile access to the program. As of March 2012 Spotify is available 15 countries including America, Australia, and much of Europe.
The charming birthday card provided by Spotify reveals a couple of important nuggets of information regarding Spotify use in the U.S. this past year. 13 billion songs have been downloaded and 23.7 million hours have been spent browsing the program’s vast selection of music in just one year. According to Billboard, the numbers of streamed songs was still 13 times smaller than Pandora, which clocked in at an estimated 166.1 billion songs streamed this past year. The NY Post reports that Spotify is currently valued at $250m, even though out of the company’s three million subscribers only about 20% pay for the service.
Streaming music is made available by Spotify’s agreements with a large amount of major and independent record labels, including Sony, Warner Music Group, and Universal. But with such a user-friendly, virtually add-free layout, how is Spotify able to pay its artists and labels? The Guardian reports that Spotify pays major record labels and large indie record labels 18% of Spotify shares, earning their favor. Unfortunately for the signed artists and less significant indie labels, the deal turns sour.
Some smaller indie labels don’t collect an advance and only receive a 50% share of ad revenue, which does not provide significant income. Artists receive only $.0013 per play. That’s 3,848 streams just to buy a sandwich at Subway. This appears to be the price of Spotify’s ability to advertise, “Millions of tracks, any time you like. Just search for it in Spotify, then play it. Just help yourself to whatever you want, whenever you want it” via their website.
Sam Rosenthal, the founder of the independent label, Projekt, didn’t agree with this philosophy. He began a brief internet battle with Spotify in October 2011 after pulling his label out. He writes in response to Spotify’s reaction to his label leaving; “In the world I want to live in, I envision artists fairly compensated for their creations, because we (the audience) believe in the value of what artists create. The artist’s passion, dedication and expression is respected and rewarded. Spotify is NOT a service that does this.” (Read the letter here)
In fact, many artists have pulled out. Adele’s 21, one of the most successful albums of 2011, was not featured in Spotify. Other big names like Coldplay, The Black Keys, and Tom Waits have also opted out. However, the vast library Spotify offers overshadows this small amount of unavailable material.
While Spotify receives its fair share of criticism, whether the program is hurting the music industry more than it may be helping is still a matter of debate. The LA times reports that digital track and album sales have been on the rise since the start of 2012, with track sales increasing 6%, and digital albums up 14%. Sales of digital downloads generated roughly $2.6 billion in 2011 and revenue from streaming services stood at $241 million.
Spotify manages to expose artists to thousands of viewers a day through Spotify radio, sharing playlists via Facebook, and the virtually endless availability of the music. Despite controversy, it’s still a sleek, convenient, social, and simple program that allows the consumer to indulge for free.