Spotify announced on March 2 that its subscriber base has entered the 50 million margin, which is more than twice Apple Music’s subscriber base. Spotify has enjoyed continuous financial growth since its founding nine years ago. Despite these numbers it has still been impossible for Spotify to make a profit because the company pays a substantial amount for licensing rights and subscriptions are relatively cheap. In order to offer a wide range of music to its listeners, Spotify has to pay to license its library of 30 million songs from the artists and producers. The licensing fees and copyright payments eat up 80 percent of the company’s revenue, and they are only getting more expensive with time. Meanwhile, the company charges $9.99 for premium subscriptions, and only 30 percent of its listeners pay the subscription fee. The rest are still listening for free.
It appears to be increasingly less likely that Spotify will be able to generate a profit in the near future. Spotify is considered a potential acquisition for big companies like Facebook and Google. Artists and many music producers are frustrated with Spotify for the minuscule profit that it is generating. International pop star Taylor Swift made headlines in November 2014 when she decided to remove her songs from Spotify, expressing her anger.
“I’m not willing to contribute my life’s work to an experiment that I don’t feel fairly compensates the writers, producers, artists and creators of this music,” Swift said. “And I just don’t agree with perpetuating the perception that music has no value and should be free.”
The financial struggle of Spotify raised economic concerns and philosophical questions. Should access to music be this cheap? Should profit matter in the music industry? Is it due to competition in the streaming music industry that Spotify has struggled? How long can Spotify deal with financial losses? Spotify also does not pay its artists what most other music services do, but how can they when they’re suffering such great financial losses?
I personally disagree with Taylor Swift’s philosophy on music. Music is valuable in and of itself, but its value lies in its audience’s appreciation. Spotify allows music to be accessible to a worldwide audience with little financial burden. Two famous philosophers could back me up on this point. Leo Tolstoy and John Dewey assert that the value of art lies in its ability to convey the artist’s feelings and emotions to the audience. In order for this to happen, there needs to be an actual audience to listen. Spotify values music, and that is why they have been willing to experiment with limited profits that few are willing to try. How many music services can do such philanthropic work? In a world that is increasingly profit-oriented, copyright and licensing fees have become the main domain of the music industry. Music is an expression of human feelings and creativity, and the fact that it stopped being universally accessible has caused people to illegally download music. Spotify offers a perfect alternative to this trivial crime by making music more available and keeping the financial burden of music access to a minimum. Spotify elevates the value of music without compromising any artists’ or music producers’ revenues. Profit is one thing, but access to music should be considered a necessity and not a privilege. Spotify has been able to achieve both without compromising the other.
Despite skepticism about its sustainability, Spotify directors Martin Lorentzon and Pär-Jorgen Pärson maintain an optimistic view on the sustainability of Spotify’s business.
“We believe our model supports profitability at scale. We have already proven that we’ve created real value for our users, and we know that the more time people spend with our product, the more likely they are to become paying subscribers,” the directors said.
“We believe we will generate substantial revenues as our reach expands, and that, at scale, our margins will improve. We will therefore continue to invest relentlessly in our product and marketing initiatives to accelerate reach.”
Spotify provides great music services, with its personalized playlists and awesome weekly Discover playlist that caters to individual listeners’ interests while allowing them to explore new genres and artists as well. Profit is a small part of the story, but Spotify’s goal and future potential is a bigger and more interesting part.
I believe in the company’s goal to make music more accessible and its ability to expand its economic prospects.
Jenny Dao ’17 (dao@stolaf.edu) is from Vung Tau, Vietnam. She majors in economics and political science.
