Spotify Market Analysis for Full Sail University Portfolio II Course

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A Market Analysis for
Spotify
Madison Canale
Full Sail University
Project & Portfolio II: Business and Marketing
November 20, 2021

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EXECUTIVE SUMMARY
This analysis looks at Spotify and its current standing with recording artists in relation to
royalties and payout models. This report showcases a brief overview of the company as well as
its current standing regarding some of its competitors. This report also includes projections on
streaming and the music industry as a whole and how Spotify can use this information to benefit
itself as well as the artists whose work is being streamed on the platform.

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OBJECTIVE
Spotify would like to improve their standing with the artists that use their platform and
offer them incentives that cannot be offered through another streaming service.
RESEARCH METHODOLOGY
The information used for this analysis was found mostly through music business journals
and blogs. There are some facts that were found internally at Spotify, such as the rate artists are
paid and the financial status of the company. Other information was found through competitor
websites and statistic sites like Statista.
Information was gathered over the past four weeks, per Spotify’s request.
The sources used and the information within them are from the last five years, with most
being within the last two years in order to have the most current information.
Results regarding SoundCloud’s new “listener-directed” payout model are still pending.
Once this information is available, suggestions may be subject to change.
RESEARCH AND KEY FINDINGS
Spotify Logo by Wikimedia Commons 1

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Spotify is the world’s leading music streaming platform with 165 million paid subscribers
(Spotify — Company Info, 2021). Spotify offers both ad-supported streaming services as well as
premium, paid subscriptions for its listeners.
According to Goldman Sachs (2021),
the music industry is set to double in revenue
to $131 billion by the year 2030. This is
mostly due to Millennials and Gen Z,
Spotify’s target markets, spending more of
their money on music than previous
generations.
Yahoo also reports that this expected growth is because of, “Factors such as the
accelerating number of paid streaming subscribers, rising adoption of smartphones, expanding
music consumption, growing popularity of digital music streaming platforms and growing
integration with social media platforms are expected to drive the market” (2021).
While artists are struggling with the streaming payout system, major record labels are
experiencing huge profit growth. Ingham (2020) reports that Sony, Universal, and Warner Music
Groups are receiving revenues of
approximately $1 million per hour from
streaming.
Because of this, stars of the
music industry are over-profiting while
everyone else is left out (Sisario, 2021).
Though stars and big labels are still
Goldman Sachs 1
Music Business Worldwide 1

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profiting, big names like Taylor Swift have spoken out in favor of small artists saying that the art
being shared on streaming platforms are far more valuable than their current pay reflects
(Sweney, 2017).
Free Your Music 1
CONCLUSIONS
Spotify, in terms of subscribers, is at the top of the streaming war. However, looking
deeper, it is also one of the companies that pays its artists the least amount per stream, making it
difficult for artists to make a living with their art. The current payout method being used by
Spotify is benefitting the big labels and their recording stars while leaving independent and small
signed artists in the dust.
With the music industries projected growth, especially in the form of streaming services,
Spotify can use this growth as an opportunity to benefit of the company as well as the artist.

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RECOMMENDATIONS
Because of a projected industry growth, Spotify has many opportunities to look toward in
the future. In this analysis, the relationship between Spotify and recording artists is of the utmost
importance and efforts can be pointed in that direction.
The most important and pertinent change to be made is changing the way Spotify pays
out royalties to recording artists (and their labels). Currently, SoundCloud is practicing a model
that is centered around each users listening habits. In short, the money paid by the subscriber
goes directly to the artists that they listen to. While this payout model was just implemented this
year, it already has recording artists demanding this method from companies like Spotify. For
this new payout method to become a Spotify reality, the following is suggested. Within the next
year, Spotify can begin to transfer over to this method by re-writing contracts, stating the new
model to be implemented. A new algorithm must be implemented within the system to determine
which artists will receive how much in terms of royalties. Subscribers must be made aware of the
changes in listening privacy and data in a way that makes them confident to continue supporting
Spotify and its current roster of artists. A new analysis is suggested within the next year to
measure how this model is benefiting SoundCloud and its artists and determine the best route for
Spotify to move forward with it.
While this new payout method is a great starting point, Spotify could expand and grow
beyond a streaming service. Spotify can monetize on the royalties that are being paid out to
major record labels by developing its own label. There is no research of any streaming service
making this move, but Spotify’s desire to continually innovate makes it the best option to begin
the movement. Having a Spotify record label will allow Spotify to work more directly with
artists and improve its standing with them. It also gives the ability to create contracts that
mutually benefit both parties in terms of streaming royalties and agreements.

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REFERENCES
Goldman Sachs – Music in the Air. (n.d.). Goldman Sachs. Retrieved November 20, 2021, from
https://www.goldmansachs.com/insights/pages/infographics/music-streaming/
How much does Spotify pay per stream? Streaming payouts comparison [2021] - Blog. (n.d.).
FreeYourMusic.Com. Retrieved November 2, 2021, from
https://freeyourmusic.com/blog/how-much-does-spotify-pay-per-stream
Ingham, T. (2020, December 4). It’s happened: The major labels are now generating over $1m
every hour from streaming. Music Business Worldwide.
https://www.musicbusinessworldwide.com/its-happened-the-major-labels-are-now-
generating-over-1m-every-hour-from-streaming/
Sisario, B. (2021, May 10). Musicians Say Streaming Doesn’t Pay. Can the Industry Change?
The New York Times. https://www.nytimes.com/2021/05/07/arts/music/streaming-
music-payments.html
Spotify — Company Info. (2021, October 27). Spotify. https://newsroom.spotify.com/company-
info/
Sweney, M. (2017, November 27). Shaken it off! Taylor Swift ends Spotify spat. The Guardian.
https://www.theguardian.com/music/2017/jun/09/shaken-it-off-taylor-swift-ends-spotify-
spat
Worldwide Music Industry to 2025 - Accelerating Number of Paid Streaming Subscribers is
Driving Growth. (2021, September 2). Yahoo. https://www.yahoo.com/now/worldwide-
music-industry-2025-accelerating-211500781.html
IMAGES

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Goldman Sachs – Music in the Air. (n.d.). Goldman Sachs. Retrieved November 20, 2021, from
https://www.goldmansachs.com/insights/pages/infographics/music-streaming/
How much does Spotify pay per stream? Streaming payouts comparison [2021] - Blog. (n.d.).
FreeYourMusic.Com. Retrieved November 2, 2021, from
https://freeyourmusic.com/blog/how-much-does-spotify-pay-per-stream
Ingham, T. (2020, December 4). It’s happened: The major labels are now generating over $1m
every hour from streaming. Music Business Worldwide.
https://www.musicbusinessworldwide.com/its-happened-the-major-labels-are-now-
generating-over-1m-every-hour-from-streaming/
Spotify Logo. (n.d.). Wikimedia Commons. Retrieved November 20, 2021, from
https://commons.wikimedia.org/wiki/File:Spotify_logo_with_text.svg