The past decade marks the end of an era. We bid adieu to cassettes and boomboxes, CDs and walkmans, records and turntables. Music has digitized. What was is now nostalgia. We must usher in the new age now characterized by streaming media. The pioneer at the forefront of this frontier is a streaming music platform known as Spotify. The company launched in 2008 and has since risen to global prominence.
Spotify is a master marketer. The company designs crafty ways of organizing their content and data, in this case music. Their organizational methods give value to their content, as well as create an interactive and engaging experience for their consumers. The platform allows the consumer a number of different ways to search for music. You can search not only by genre or artist, but by mood, and themed playlists. It is even possible to check out music your friends are listening to.
@Spotify just debuted #SpotifyLandmark, an “aural history” of legendary music
@Spotify just debuted #SpotifyLandmark, an “aural history” of legendary music
This type of data organization engages the user. It encourages discovery and interaction between consumers and the platform. Spotify’s new initiative Spotify Landmark also adheres to this blueprint for immersive content. Spotify Landmark is an original audio series that narrates the creation of classic albums and legendary concerts. It stitches together an oral history with intimate interviews from producers, musicians, and other key members of the industry.
Spotify is a portal into the musical annals of the universe. The company knows their audience. Their work shows this as they strive to build more access and better experiences for their consumers. However, Spotify’s marketing success has proven more difficult to translate over into the business sector. The company’s contracts with three major record labels have expired and they are now in the middle of new negotiations.
The record labels own the music. As a result, Spotify has paid large percentages of its profits as royalties to the record labels. When the company first launched they had no leveraging power. They were a startup with only a few followers. Spotify had to pay record labels enormous upfront advancements on royalty payments. Circumstances have now changed. The company now has over 50 million paid subscribers and an even larger base of ad-supported, free listeners. Their market power has grown. Since so many people now look to Spotify for their music consumption, the record labels now need Spotify as much as Spotify needs the record labels.
@Spotify and record labels are in a bitter battle for fair royalties
@Spotify and record labels are in a bitter battle for fair royalties
The problem that is arising in the new contract negotiations boils down to royalty percentages. Spotify wants to decrease the percentage of royalty fees they pay the labels and ergo the musicians. They argue that if they hope to compete with the spending power of challenger companies, such as Apple Music, Amazon Music, and Google Music, they need the record labels to cut them slack. In contrast, the record labels want to increase the royalty rates in the new contracts, and thus an impasse presents itself.


The record labels now need Spotify as much as Spotify needs the record labels.
The problem that is arising in the new contract negotiations boils down to royalty percentages. Spotify wants to decrease the percentage of royalty fees they pay the labels and ergo the musicians. They argue that if they hope to compete with the spending power of challenger companies, such as Apple Music, Amazon Music, and Google Music, they need the record labels to cut them slack. In contrast, the record labels want to increase the royalty rates in the new contracts, and thus an impasse presents itself.
The impasse seems like a crippling headache at first glance. However, negotiations between Spotify and the record labels remain optimistic. They are both committed to their mutually beneficial relationship and Spotify’s music license continues on a rolling month-to-month basis. The most likely outcome will be a similar licensing deal at around the same levels of previous contracts. However, Spotify is taking this opportunity to expand their role in the music industry.
Spotify has begun looking into traditional record-label deals with artists. The idea being to circumvent contracts with record labels. Apple Music did a trial version of this with Frank Ocean and Chance The Rapper. Apple paid advances for exclusive rights to their respective albums Blonde and Coloring Book. The exclusivity only lasted about 2 weeks, but the trial proved successful with both artists.

As Spotify and other streaming networks expand their involvement in the music industry the traditional framework of the record label will also change. The current balance of power can easily tip with the continued success of streaming media. As that happens the music industry will be forced to change the long-standing establishment.

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