After almost 14 years, Spotify is just beginning to show signs of profitability. In Feb. 2019, they reported that their 2018 “Operating Income, Net Income and Free Cash Flow were all positive,” according to Business Wire. This was a major step in the right direction for Spotify. Now they’ve announced they’re offering alerts that artists or artists’ labels can pay for to increase their profit even more.
What is it?
A blog post on Spotify’s website tells users that they are making it easier to keep up with your favorite artists with this new feature. You might have noticed that these full-screen pop-ups already appear on your Spotify. After recent feedback, people seem to be enjoying this new addition, Spotify said. Because of this, they are making it a permanent feature that will also financially benefit the company. Soon, artists and their teams can begin paying for recommendations to appear on listeners’ Spotify accounts.
Spotify included an example of this new feature in their blog post. They linked back to a tweet where a twitter user praised the company for recommending Lana Del Rey’s new album to them. “@Spotify knows me,” @jddrees94 tweeted.
“With an upcoming test we’re running in the US, we’re giving artists and their teams the ability to directly tap into this process and connect with the fans that care most about their music.” These “Music For You” announcements will appear in both Free and Premium accounts, but Premium users can turn it off. Spotify promises that these recommendations will cater to your “music taste.” Therefore, “you will only hear from artists that you frequently listen to or follow.” The statement also assures listeners that their suggestions will include a variety of artists.
Why Are They Doing This?
A recent Variety article points out that the company is being transparent, but their statement, “leaves the door open for the program to be modified in the future.” As Spotify’s profitability rises, it’s not hard to understand why they want to increase income through these advertisements.
Generally, Spotify makes money through advertisements and paid subscriptions. Free account members can listen to any song after listening to an ad. Premium members have access to music without ads, but they pay anywhere from $5 to $15 depending on the account. All of this money goes into paying royalties.
Over the years, artists have accused Spotify of unfair compensation. In Nov. 2014, Taylor Swift pulled all of her music from Spotify’s catalog because she believed Spotify was not accurately paying artists. She contended that royalties from Spotify were nowhere near what artists and record labels should be receiving. According to Investopedia, “in 2013, Spotify revealed that on average, it paid record labels merely a fraction of a penny per song play (between $0.006 and $0.0084), while the artists themselves received even less cash.” In response, Spotify began limiting the company’s free ad-supported tiers in order to fix these issues.
The artist-paid alerts feature will hopefully keep Spotify on the uphill. This addition benefits the artist, listener and the company as a whole, so it’s a useful tool for everyone.