In a dozen years since its founding in 2008, Spotify has gone from a small Swedish startup to a global titan of the streaming industry, with nearly 350 million users in almost a hundred countries. And in an announcement made in the last week of February, the CEO of Spotify, Daniel EK declared that Spotify would be expanding the scope of their services to a vast number of new markets around the globe, including, among over eighty other countries, Bangladesh.
One message rang very clear during Daniel Ek’s announcement – the platform aims to put artists and creators first and foremost, effectively reducing and eventually nullifying their dependence on labels to promote their own music, podcasts and whatnot. Spotify has a whole slew of new tools aimed primarily at podcasters, to help them interact better with their audiences, particularly utilizing subscription-based revenue models and superior ad insertion technologies. While the inclusion and deployment of third-party ads in podcasts may seem detrimental for podcasters, it is indeed the most feasible model for profitability under current circumstances, and it is certainly one of the most crucial factors that are likely to play a role in Spotify’s survival and growth in the coming years.
Daniel Ek started Spotify in a time when the very idea of dedicated streaming music services was still a bit of a pipe dream, but he was patient enough to play the long game by creating a service that people would readily jump aboard because of the sheer convenience it offers. Even many wizened music pirates have turned to Spotify because of its unbeatable value – having the chance to listen and download almost every song out there for the small price of a few coffees each month. It does not put a dent in anyone’s wallet, while offering a veritable smorgasbord of songs and podcasts that most other services would struggle to match. Even in Bangladesh, a year-long Spotify Premium subscription can be had for as little as BDT 1,999, which is an incredible deal for anyone from any income bracket who can afford even the cheapest smartphone or computer, and have access to an internet connection. The chain of conversions only continue as existing users go on to convince new users to try out the service (the month-long free trial of Spotify Premium is enough to spoil most users) and experience what the hullabaloo is all about, only for them to pick up a subscription once the trial is over.
Unlike many forms of entertainment, the unique thing about music and podcasts is that they can be experienced as dedicated experiences, or in combination with many other forms of entertainment. One can enjoy Spotify while reading, exercising, cooking, gaming, working, or doing pretty much anything that does not require the ears to be occupied otherwise. As a result, unlike other subscription-based services like Netflix, which require dedicated attention from multiple senses, Spotify would automatically see much more action in a subscriber’s daily life, and it makes the affordable price tag seem even more reasonable. And while there are other competitors in the market like Deezer and Tidal, Spotify has managed to strike the perfect balance of content, affordability and accessibility, which has made it the biggest player in the streaming music market. Its platform-agnostic nature allows it to be run on any operating system as a native app or as an in-browser web app, which increases its flexibility manifold.
However, the new business model Spotify is about to embrace extends beyond subscriptions and ads. The third part of the new monetization model, dubbed the ‘à la carte’, involves giving podcasters and musicians the option of offering special products such as official merchandise, concert tickets and special paywall-based ‘fans-only’ subscriptions to exclusive content to listeners, all through the Spotify service chain. According to Spotify’s own statistics, as of now, more than 7,500 musicians and podcasters around the world are making over USD 100,000 a year through the platform, and there is still a great deal of potential for that population to grow substantially. Daniel Ek speculates that the new model would enable the number of content creators on Spotify to eventually rise to approximately 50 million from the current 8 million, catering to billions of consumers. While a vast percentage of these creators will inevitably not make it to the top, the ones who achieve success would have ample room to showcase and magnify their excellence, all the while giving the consumers more options from within an already vast pool.
The flexibility of à la carte would also enable artists to carefully tailor their entire range of offerings, audio and otherwise, to suit the exact requirements of their target market, allowing monetization to occur with maximum effectiveness. For example, a performance-oriented artist may choose to rely more on concert ticket sales, while a studio-focused artist may go for album and merchandise sales, and the magnitudes of these offerings can be defined using Spotify’s own new marketing tools.
As a company, Spotify has never been afraid to experiment, and a great deal of the effectiveness of its new three-pronged business model can be honed only through repeated experimentation. Community feedback is a huge part of the entire process, and it is going to be the single most important factor – alongside profitability matters – that would ensure whether a new feature is going to stand the test of time or be weeded out in favour of newer and better ones. Instead of keeping the whole process internally contained, Spotify’s renewed approach toward feature rollouts is quite reminiscent of Google’s, where new features are rolled out to users and their feedback is readily incorporated into the process. Spotify has been committed to providing the best possible internet-driven audio experience to its users, and its recent global expansion, combined with its new business model, is a step down the path to its eventual ubiquity.
