Last week, Spotify announced a new "experiment" in which the streaming giant will allow artists the option to have their music boosted by the platform's algorithm in exchange for a lower royalty pay rate.
Here are three takeaways you need to know about how this move may impact listeners, artists, and the broader streaming business at large.
Personalized listening experiences remain the company's top priority.
Spotify's secret sauce is its algorithm, but with the company's latest announcement, consumers fear it may become diluted. First, it's important to note the experiment is limited in scope, with promotional boosts impacting only the Radio and Autoplay features of the site. If you don't find yourself utilizing these features, your experience won't appear any different.
The task for Spotify, however, is to ensure those who do use these features don't observe a drop in quality. The company is cognizant of this and has been clear to state that just because an artist opts into the promotional program, that does not mean they are guaranteed airplay. "If the songs resonate with listeners, we’ll keep trying them in similar sessions. If the songs don’t perform well, they’ll quickly be pulled back,” Spotify's statement reads.
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This is effectively a "luxury" feature for established names.
Like most entrepreneurial endeavors, embarking on a career as an artist takes effort and sacrifice. The struggling artist must first find financial security before having the means to reinvest back into their craft. While it's respectable that Spotify is leveling the playing field by giving all artists access to opt into their new promotional feature, the fact is it takes nearly 3.5 million streams at Spotify's standard royalty rate just to achieve a minimum wage.
It's difficult to imagine artists, who have already been sidelined from touring due to the pandemic, engaging with this feature unless they are already financially secure or an established name. The opportunity cost of a pay cut for exposure is a luxury in the present economic environment and it seems this will likely result in further concentration of mainstream talent on Spotify Radio.
Music streaming remains a commodity business.
Our relationship with music has changed drastically with the advent of the streaming era. Music streaming has effectively become a commodity business with each major platform charging roughly $10 a month for all-you-can-consume style access. That means the public generally has the upper hand, because they can choose where their $10 goes all while enjoying the same product, and a similar user experience.
Rather than rock the boat with a price increase to its users, Spotify instead sees the path to sustained profitability in finding creative new ways to cut expenses. This move accomplishes exactly that, and incidentally, it arrives at a time when the company has been targeted by a vigorous campaign launched by the Union of Musicians and Allied Workers that demands a royalty rate increase to 1c per stream.
While we're still reserving some judgement to see how things play out in practice, one thing is clear. Spotify hasn't lost its roots as a "disrupter" and isn't afraid to go out of the box in order to shake things up.