In June 2015, the service reported 75 million active users, of which 20 million were on a paid plan (that’s over 25%). Recently, their chief revenue officer shared that they were on track to hit the 100 million active user mark before the end of 2015. Consumers have adopted the Swedish service en masse, with Scandinavian countries leading the way, followed by the rest of Europe and now the rest of the world. By allowing people to experience the platform for free through their ad-supported freemium model and over-delivering on user experience, Spotify’s initial growth was largely driven by word of mouth instead of advertising.
Now, having captured the majority of market share in Europe and with the competitor Apple Music entering the scene, Spotify has attracted more venture capital and is beginning paid advertising campaigns to win users in territories such as the USA.
This is interesting for artists and labels alike, as it means that streaming is now getting more exposure than ever.
Personally, I’m a fan.
Two years ago I started using Spotify, immediately subscribing to a paid plan after discovering the smooth user experience, nice interface, large catalog of music and ability to stream at 320kbps MP3 quality (yeah, Netherlands mobile networks rock).
Before, I had been an iTunes kind of guy, downloading music and syncing it to my iPhone to listen on the go. It worked, but the process was far from optimal – because of the set-up time of downloading and migrating the files to my phone, in reality, I ended up listening to the same collection of music for extended periods of time.
The switch to Spotify reminded me of my initial migration from Windows to OSX… awkward at first but much more efficient once I got accustomed to the interface.
The new paradigm
I think the popularity of streaming services such as Spotify, Apple Music and even Netflix are symptoms of a new paradigm: accessibility over ownership.
Consumers prefer easy access and a comfortable user experience over actually owning products and services.
After all, why would you purchase CDs if you can stream high-quality music on your desktop or smartphone, with your whole collection being accessible cross-device and have the option to sync for offline listening? It’s simply a better user experience.
Sure, some people still purchase CDs and vinyl because to them nothing beats the experience of having a physical product. Others still purchase CDs or download lossless quality files because the audio quality is better. Both are valid arguments, I get them, however percentage wise this is just a minority of all the music listeners.
Streaming is changing the game and with Spotify being at the forefront, I wanted to dedicate a post to talk about how you can get the most out of it.
Getting your music on Spotify
You can view Spotify as a store similar to iTunes and Beatport, falling in the category of DSPs (digital service providers).
To get your music up on the platform, you need to make sure you have all the rights (no unofficial remixes, uncleared sample usage, etc). From there, you will need either a direct distribution deal with Spotify (reserved for large record labels) or a connection with a distributor or aggregator that does.
For those of you unclear about the distinction, an aggregator is a company that provides distribution services to a large user base, supplying the content to multiple digital service providers (DSPs) (iTunes / Spotify / Beatport / Apple Music etc).
Distributors essentially do the same thing, but at a smaller scale (fewer clients with bigger catalogues) and work closer with specific record labels and artists and can assist in facilitating marketing placements on the stores.
In terms of the time it takes for your music to be live on the store, Spotify is one of the quicker DSPs and depending on your distributor’s processes, your music can be up on the store within 1-3 days after delivering the content.
There’s been a lot of fuss in respect to Spotify’s royalty payments.
Firstly you will have to understand the difference between the freemium and premium models. The one is free to use and shows ads (display and audio) to users, whereas the premium model is ad-free and requires a monthly fee.
Plays are not treated equal on the platform. Plays of premium users result in a higher payout to rightsholders than those of freemium users.
How it works – roughly – is that Spotify takes all the subscription (premium) and advertising (freemium) revenues over a said period, dividing those monies by the total amount of streams.
Rightsholders are paid out based on those rates and from what I understand these are corrected by the percentage of plays that came from the freemium / premium users (so larger % of streams from paid users = higher royalty rate and vice versa).
Of course, that imposes a problem.
With their tremendous growth, going from 60m active users of which 10m paid in late 2014, to 75m active users of which 20m paid in mid 2015, the growth of free users is larger than paid users, thus diluting the per-stream royalty rate.
The more users Spotify acquires, the lower the per-stream royalty rate, unless the paid-to-free subscription ratio maintains or rises. It’s like inflation.
The rates are also influenced by the country of which the streams originate (because of territorially dependent advertising buys and currency value) as well as the price of paid subscriptions, which may vary because of discount and package deals.
Spotify officially reports their average composite per-stream rate to be between $0,006 and $0,0084.
Our rate with Heroic over 2015 Q3 was approximately $0,00475 per stream, without including any distribution fees. This is the pure rate we received from Spotify via our distributor. For clarity, these are Spotify royalties over the master.
For songwriters it is different. Internationally, parties have decided to consider a stream roughly 75% public performance and 25% mechanical reproduction. Spotify pays these rates on behalf of the label (by withholding it from the master royalties) and allocates it to the PRS’ whom in turn collect for the publishers or songwriters directly.
These rates are much lower, with some songwriters reporting receiving roughly $0,00009 per stream. That’s $90 for 1.000.000 plays.
Nonetheless, Spotify is becoming a significant revenue stream for record labels and performing artists. With Heroic, we’ve seen Spotify’s share of our distribution income shift from 10% to over 55% in the last two and half years.Free Download ‘Spotify Best Practices’ Checklist
Pair that up with a decrease in iTunes (Apple is pushing consumers towards their Apple Music streaming service) and Beatport sales (their new streaming service is terrible, the pro.beatport.com store is confusing and SFX stock has plummeted) and you can see how streaming is going to account for the lion’s share of (digital) recording revenues in the coming years.
The biggest driver of plays on Spotify are playlists and charts.
These are lists that are curated by both consumers and companies, which list tracks that they enjoy. Spotify’s playlists are cool because when you follow one, you’ll get a notification every time a track is added to that playlist. That’s what drives the plays.
Every user has the ability to create playlists and retitle them, however the ability to customize artwork and add a description is restricted to VIP / verified accounts.
In the past Spotify allowed users to discover playlists of other users via the browse sections of the app, however, these playlists have been removed and only those controlled by Spotify and the major labels are now shown.
Yeah, there’s a monopoly going on there.
Because Spotify’s success hinges on their ability to use the music of the major labels, there have been intense negotiations and the majors have managed to negotiate higher-than-standard royalty rates and control over a share of the advertising space and playlists on the platform.
Most users don’t realize this, but all those popular playlists that don’t carry the Spotify brand are all controlled by the majors: Filtr is owned by Sony Music, Digster by Universal Music Group and Topsify by Warner Music Group.
This control allows them to influence (Spotify) chart positions, plays on their tracks and improve the success rate of their releases beyond Spotify (improving odds on Shazam, general charts, radio and other DSPs).
So you’re wondering: how do I get my music on those playlists?
Great question – with an unfortunately complex answer. Because the biggest playlists are controlled by a few established parties, penetrating the market can be difficult.
Nonetheless, here are your options.
Spotify’s self-controlled playlists:
You’ll either need a contact at Spotify, or more realistically, a deal with a distributor or aggregator that does.
Ask them about how you can file for a ‘priority track request‘ or what is also called a ‘feature placement‘. This constitutes the distributor filling in a form with Spotify where they outline the projected sales figures for the release, as well as the artist’s historical sales figures and a summarized marketing plan.
Spotify then decides whether to place you or not. Success is largely based on the validity of your story; sales numbers, outstanding marketing campaign, proper label backing. It’s important to have both your label and distributor double down if you really want to make this happen.Free Download ‘Spotify Best Practices’ Checklist
Record label playlists:
Release with one of the major labels or bigger independents that control their own playlists. Labels such as Spinnin and Armada are doing a great job at playlisting in the electronic realm.
Leading up to your release, ask them about how they will employ their playlists to generate traction with your release. You may even want to ask them to run a Spotify exclusive for 1-2 weeks leading up to the release, if they think it will increase your odds of being included in one of Spotify’s primary playlists via a priority track request.
With Spotify removing independent playlists from the Browse section, tracking the best independent playlists can be a struggle.
Here’s a few methods to find them:
- Search for popular keywords (think Tomorrowland, EDM etc) and filter through the results, filtering out those with the most followers (anything with 5.000+ followers is significant).
- Search Google for lists of the most popular playlists. Like this.
- Or use websites that index Spotify playlists such as Playlists.me and SharedPlaylists.com.
From there, the process is straightforward: trace the account that created the playlist and employ your best internet researching skills to find a way to contact the playlist creator (usually via email, Twitter or Facebook Chat).
Catalog your results in a Google Sheets database. Here’s a template that you can use (copy the tab to a new Sheets document to get started).
Similar to other streaming platforms, metrics are important to both see how your releases are performing, as well as to better understand your demographic (where they are based, when they listen etc).
You can view the play counts of tracks on Spotify by hovering over the battery like indicator next to a track.
These metrics are always delayed by 2-3 days though: 10.000 plays on a Monday would be visible on a Wednesday or Thursday.
In the past, Analytics were accessible for managers and labels via Spotify’s integration with Next Big Sound (a social media data aggregator for artists). Recently however, Spotify announced Fan Insights, for which limited beta applications are being accepted here.
We’ve recently received access to Spotify’s more extensive Analytics platform and the data is incredibly interesting – all our artists see a massive fall-off of plays on Saturday and Sunday, whereas the more downtempo music peaks in plays on Monday and more club-oriented music performs best on a Friday.
We’re also seeing that the bulk of our Spotify audience is in the United States, followed by the UK, Sweden and Germany. Germans seem to love bass music and trap.
Beyond the freemium and premium subscription levels, Spotify makes a distinction between traditional user accounts and artist profiles.
When a release is distributed to Spotify, a profile is created for the artist, automatically generating a profile picture based on the release’s artwork.
Initially, these artist profiles are detached from any user accounts, however through requesting verification one can link these together, as well as add an about page with a custom biography, as well as customize the artwork – and receive a shiny blue checkmark (check out the San Holo page as an example).
The linkup between the profile and user account is great, because it’ll merge all the followers of both accounts into one and allow the artist or label to use the personal account as if it were the artist account, sharing all activity in the process.
This creates great opportunities for sharing content within Spotify (by right clicking a release), broadcasting it to all of the account’s followers with a custom message.
Any playlists that are created by the user are now linked and displayed to the artist profile. This is amazing and allows an artist with say 20.000 followers to create a playlist, share it to the followers and kickstart the playlist’s follower growth.Free Download ‘Spotify Best Practices’ Checklist
If you’re verified, I highly suggest you to use this trick to your advantage, creating a playlist in which you can include all your releases (titled something like ‘Artist – Official Releases’) and one for your inspirations (‘Artist – Inspirations’). This will be interesting for your fans to follow and allows you to give your releases a little extra push when they come out by including them in those lists.
You can request verification for your account here.
I hope this article improves your understanding of Spotify and how to excel on the platform. Please let me know what your biggest struggle is on the platform in the comments, or any other questions you might have. I’ve also put together a checklist of ‘best practices’ you can use in order to get the most out of your Spotity profile which you can get below.
If you’re interested in other platforms such as SoundCloud you can check out my newest article here on how you can improve your SoundCloud marketing game.
Like this content? Check out the free video series for my new course, the Music Marketing Academy. You can get access here.