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On Thursday (March 9), the RIAA released its annual year-end report on recorded music revenues in the U.S., with an encouraging top line: In 2022, total revenue was up 6% to $15.9 billion, with paid subscription and wholesale revenues each surpassing $10 billion for the first time. That marks the seventh straight year of growth for an industry that at this point is far removed from the doldrums of the early part of the century.
In fact, the industry could credibly be a little underwhelmed by the rate of growth, as the 6% figure is the lowest percent increase across those seven years — and the only time other than pandemic-affected 2020 (+9.2%) that growth has fallen below double digits during that period. In actual figures, it’s the smallest increase ($900 million) year over year since 2016, when the business grew 11.4% and added $700 million.
There are plenty of other interesting takeaways to discern from digging through the RIAA’s report. Here are four (plus one bonus item!) that stand out.
Paid Subscriptions — Anything to Worry About?
Both the average number of paid subscribers (those subscribing to full-catalog services like Apple Music or Spotify’s paid tier) and the revenue from full-catalog paid subscriptions grew at much slower rates, both in percentage terms and in actual numbers, than in recent years. The former metric showed an increase of 8 million subscribers (9.5%; 84 million in 2021 to 92 million in 2022), while the latter metric reflected an increase of $600 million (7.2%; $8.56 billion to $9.17 billion). As with the overall growth rate for the industry, that’s the first time in several years that those figures grew by less than double-digit percentages. So, is it anything to worry about, when looking at how much growth there is left in the paid streaming business?
Not necessarily. For one thing, between 2018 and 2022, paid subscribers (up 96.2%) and revenue from full-catalog subscriptions (up 93.6%) have grown fairly in line with each other, and the revenue per subscriber has averaged $98.92 over that period of time (pandemic-affected 2020 was an outlier year, at $92.35). In 2022, the average revenue per subscriber was $99.77, which was down from $101.94 in 2021 but not out of line with the overall average.
That number should be expected to grow, given price increases by Apple Music, Amazon Music and Deezer in the past year and the increasing pressure on Spotify to boost its price higher than $9.99/month, where it has stayed since entering the U.S. in 2011. This will be something to keep an eye on as the year progresses, as strategies shift from gaining subscribers to getting more out of those who do subscribe, given that a ceiling on the number of subscribers could be coming into view (for context, the U.S. government counted 124 million households in the latest census).
Another reason for optimism: The above numbers don’t include limited-tier subscription revenue — things like Amazon Prime and fitness apps like Peloton — which crossed the $1 billion mark for the first time in 2022. Since 2020, when the pandemic led to a home fitness app craze and resulted in additional areas of limited music subscription beyond the traditional paid streaming realm, limited-tier subscription revenue has grown 47.7%. As more licensing opportunities arise, that sector should continue to contribute meaningful revenue moving forward.
Ad-Supported Streaming Takes a Hit
Ad-supported on-demand streaming revenue reached $1.8 billion in 2022, accounting for 11% of the overall revenues for the business last year. But growth was just 5.5% over 2021 — a big reality check after the category grew 46.7% in 2021 over pandemic-affected 2020 and 16.4% at the mid-year mark of 2022. Even in 2020, when the world essentially came to a standstill for several months, year-end ad-supported streaming revenues grew 16.8%, up $170 million — higher than the $95 million gain seen in 2022.
The advertising slump last year was certainly a blow to U.S. industries, with layoffs across the music and tech landscapes in particular. Many companies cited “economic headwinds” due to a combination of factors, including the war in Ukraine, rising interest rates, inflation and the threat of recession as companies scaled back spending that had ballooned coming out of the pandemic and readjusted forecasts for an uncertain future. All of that certainly played a part. But since 2018, ad-supported on-demand streaming revenue grew 137%, becoming an increasingly large part of the overall pie. In comparison, 5.5% is likely a disappointing number to many in the industry.
Vinyl, Vinyl, Vinyl
Another year, another big headline involving vinyl’s 16-year winning streak: For the first time since 1987, the number of vinyl LPs sold in the United States (41 million) surpassed the number of CDs sold in the calendar year (33 million). Vinyl sales reached $1.2 billion in 2022, up 17.2%, while CD sales plummeted once again, decreasing 17.6% to $482 million. Despite the eye-popping vinyl revenue numbers, however, actual unit sales only rose 3%, meaning that the price of vinyl is getting more expensive. In 2021, the average vinyl record cost $26.12; in 2022, that number rose to $29.65. There’s plenty to unpack there, including increased production costs and inflation.
Another notable development in the vinyl craze that has sharpened in recent years is the shifting market share among vinyl retailers. As far back as 2015, when the industry started to emerge from its nadir, the market was dominated by indie records stores (45.42%), internet/mail order sellers like Amazon (32.88%) and chain stores like Best Buy (15%), according to Luminate. By 2018, indie stores and Amazon sales had essentially settled into a market share tie — each at 41% — while the Best Buys of the world had shrunk to just north of 10%.
But beginning in 2019, a fourth player began to emerge: Mass merchant stores like Walmart and Target, which dramatically expanded their inventories. As a result, their market share went from less than 1% in 2015 — accounting for some 7,000 sales — to 10.19% in 2019 and 14.75% in 2021, with sales of 6.1 million units. While the market share economics have shifted during that time, sales have continued to increase for each sector across the board. In short, part of what has been driving the boom has been sheer visibility in some of the biggest stores in the country, which has correlated to more sales, and thus more visibility, and around and around we’ve gone. (For those curious, in 2022 indie stores accounted for 48.1% of the market, having reclaimed their dominant position as the country emerged from the pandemic.)
The Synch Explosion
In the past few years, more and more songs have caught huge waves due to synchs in popular TV shows and films. Think Kate Bush’s “Running Up That Hill” following its Stranger Things placement, The Cramps’ “Goo Goo Muck” following its Wednesday placement and Gerry Rafferty’s “Right Down The Line” from Euphoria, to name a few. That seems to have stemmed from the explosion of content, as the streaming wars in TV/film world heated up during that time — with Netflix, Disney+, Hulu, Peacock, Paramount+, Apple TV+ and the rest all throwing money around to reel in subscribers. The RIAA numbers back that up: In 2022, synch revenue grew 24.8%, from $306.5 million to $382.5 million, marking a gigantic jump. In fact, from 2020 to 2022, synch revenue jumped 44.2%, outpacing the industry at large (which was up 30.3% in that span).
Will that upward trend continue? It’s unclear. The TV/film streamers have publicly cut back their content spends in the past six months as the battle for market share and subscribers veered into profligacy and waste, while corporations looked to reel in costs amid the broader economic landscape. But it’s possible those gains are here to stay, even if they regress a bit. One music group executive recently told Billboard that in addition to the big four streamers (Spotify, Apple, Amazon and YouTube), Netflix was quickly becoming a fifth major source of revenue thanks to a combination of direct synch payments and the long tail of streams that result from a high-profile placement. That’s something to keep an eye on moving forward.
Bonus Takeaway — Ringtones!
Finally, a small bonus addition from a personal favorite aspect of the RIAA report. The mid-to-late-2000s were, of course, a time of great uncertainty and anxiety in the recorded music business, as piracy and digital music chipped away at a once-dominant physical sales format. At their height in 2007, ringtones and ringbacks were able to plug the gap to the tune of $1.1 billion, according to the RIAA. (That would be around $1.6 billion today.) So, how much money did ringtones and ringbacks generate in 2022?
$11 million!
Please, RIAA, continue printing this as a line in every report, no matter how small the figure gets. While it’s currently the smallest line item by revenue in the entire report, I cherish it more than all the others.
SoundCloud named Eliah Seton as its new CEO, the company announced today (March 9). Seton, who has served as president of the company since 2021, replaces Michael Weissman, who is leaving the company “for a new opportunity,” according to a press release.
Simultaneously, the company announced that Union Square Ventures founder Fred Wilson has been named chairman of the board. Wilson, who has been on the board at SoundCloud since 2011, replaces company founder and former CEO Alexander Ljung, who will be taking a new role as chairman emeritus and remain a member of the board.
“As the only platform with direct relationships with artists and fans at scale, SoundCloud has a singular opportunity to forge the future of the music industry by unlocking the full power of fandom,” Seton said in a statement. “I am grateful to Mike for our partnership, to Fred and the board for their confidence and thrilled to work alongside our incredible leadership team to realize that vision.”
Seton joined SoundCloud from the Warner Music Group, where he spent a number of years first working for former WMG CEO Stephen Cooper, then as senior vp of strategy and operations for Warner International, before moving to ADA, eventually being named president of independent music and creator services for the major label. He moved to SoundCloud in 2021 during a shakeup of the company, during which Weissman moved into the CEO role and SoundCloud began an evolution from an indie-focused streaming service towards a hybrid organization that now offers label and artist services, as well as distribution, audience insights and a growing roster of artists and partnerships.
During that period, SoundCloud also rolled out a fan-powered royalties initiative, which switched up how independent creators got paid on the platform, and Seton led the deal that brought Warner Music artists into the fan-powered royalties fold. In August, the company laid off 20% of its global staff while it pursued a different strategy amid the advertising-affected market, though in December it announced its revenue grew 19% in 2021, according to financial statements published in Germany. In the past year, SoundCloud has inked joint ventures with Quality Control’s management wing Solid Foundation and Atlanta-based management and services company Third & Hayden, and partnered with artists such as Lil Pump, Tekno and Aly & AJ, among others.
Wilson replaces Ljung as chairman, who originally founded the company and was its CEO from 2007 to 2017, at which time Kerry Trainor took over as CEO and Weissman as COO. According to a press release, Ljung will “remain closely engaged and available to the company’s management team and employees going forward.”
“I have served on SoundCloud’s board for more than a decade and can honestly say that I have never been more excited about the direction and leadership of the company,” Wilson said in a statement. “Eliah’s passion for the business of music, relationships and vision are exactly what is needed for the next phase of SoundCloud’s growth. On behalf of the board, I want to thank Mike for his leadership, dedication and partnership over the past several years and welcome Eliah to this new role.”
Apple Music is ready for its long-awaited dive into classical music, with a standalone app. Announced Thursday (March 9), Apple Music Classical is pitched as the “ultimate classical experience,” and is said to be years in the making.
The app will invite classical fans to stream hundreds of curated playlists and thousands of exclusive albums, plus view exclusive artworks and digital portraits, browse composer biographies, editorial notes and more. AMC launches on March 28 but is available to “pre-order” now in the App Store.
Apple Music subscribers will be able download and use Apple Music Classical at no additional cost to their plan. While it’ll be a standalone app, only Apple Music subscribers will have access to it.
At launch, the service will boast the world’s “largest classical music catalog” with over 5 million tracks and works from new releases to recognized masterpieces, according to a statement.
The app’s search engine can locate recordings by composer, work, conductor, and even catalog number, and audiophiles will be rewarded with “thousands” of recordings rendered in immersive spatial audio.
Apple’s full-on plunge into classical follows the tech giant’s acquisition of Primephonic, the Netherlands-based classical music streaming service, in a deal announced back in Aug. 30, 2021, a precursor to the launch of a dedicated experience for classical music fans, which was tentatively planned for 2022.
“We love and have a deep respect for classical music, and Primephonic has become a fan favorite for classical enthusiasts,” Oliver Schusser, Apple’s vice president of Apple Music and Beats, said at the time. “Together, we’re bringing great new classical features to Apple Music, and in the near future, we’ll deliver a dedicated classical experience that will truly be the best in the world.”
That dedicated classical experience is set to go live later this month everywhere where Apple Music is offered, with the exception of China, Japan, Korea and Taiwan; those regions will follow at an unspecified date, reads a corporate statement. Also coming soon is Apple Music Classical for Android.
The app will be available for all iPhone models running iOS 15.4 or later.
There are twin $10 billion milestones served up in the RIAA’s 2022 year-end report on U.S. recorded music revenues: paid subscription streaming revenue reached $10.2 billion over the course of the year; and industry revenues at wholesale reached $10.3 billion, the first time either of those markers have been crossed, the trade body reports.
Those are two headline numbers of the annual report, wherein U.S. recorded music revenues grew 6.1% at retail, from $15.0 billion in 2021 to $15.9 billion in 2022. That marks the seventh straight year of growth for the business, though the percentage of that bump is the lowest since 2015 (+0.9%), the first year that retail revenues began to rise from the industry’s 2014 nadir. (The growth that year was so small, around $65 million, that it was essentially flat for all intents and purposes.) In fact, 2022 is the only year during that time period when growth has not exceeded double digits other than 2020, when a first COVID-impacted year of uncertainty still saw a 9.2% rise in revenue.
Streaming, unsurprisingly, made up the bulk of the industry’s revenues — 84%, up a tick from 83% in 2021, adding up to $13.3 billion in 2022, up 7% from $12.4 billion the year before. Within that, the aforementioned paid streaming chunk was the largest, accounting for 77% of that total for 8% year-over-year growth, and in and of itself making up just shy of 2/3s of the industry’s overall revenues; of the overall paid streaming number, so-called “limited-tier” subscription streaming — including the likes of Amazon Prime, Pandora Plus, Peloton and other fitness or restricted streaming options — grew 18% to surpass $1 billion, coming in at $1.1 billion overall. And ad-supported streaming — like YouTube, Spotify’s free tier or revenues from TikTok — moved up 6% to $1.8 billion, making up 11% of all revenues for the year.
The average number of paid subscriptions in the U.S., meanwhile, reached 92 million, up 9.6% from the 84 million that existed in 2021. (The RIAA notes that this does not include limited-tier subscriptions, and counts “multi-user plans” as one subscription. The overall paid streaming figure of $10.2 billion includes limited-tier.) That growth, while significant given that it is higher than overall revenue growth, is down in both actual numbers and percentage growth for 2021, as was the revenue growth gleaned from paid subs, suggesting that while there’s still room to go higher and records continue to get broken, there may be a slowdown in subscriptions in the future.
Outside of those streaming figures, digital and customized radio revenue — paid out by services such as SiriusXM — inched up 2% YoY, even as SoundExchange payouts declined 3% to $959 million; those other ad-supported platforms such as SiriusXM and other internet radio services grew 28% in revenue during the year, contributing $261 million to the overall pie. That ends a few straight years of growth from SoundExchange distributions, though the overall figure of $1.2 billion from digital and customized radio in general has remained relatively flat for the past several years.
Also within the digital realm, downloads continued their stumble down the proverbial cliff, dropping 20% across the board — both for tracks and for digital albums — to total $495 million in revenue ($242 million for tracks, $214 million for albums). The RIAA notes that in 2012, digital downloads made up 43% of the overall industry’s revenue; in 2022, that number was just 3%. Factoring other formats, total digital revenue was $13.8 billion, up 6.0% from 2021, or 87% of the total business.
For the first time since 1987, vinyl LP units outsold the number of CDs, 41.3 million to 33.4 million (vinyl overtook CDs in revenue in 2020), as its year-over-year growth streak stretches to 16 years — old enough to drive. Total physical revenue was up 4% in 2022 to $1.7 billion, of which $1.2 billion came from vinyl — up 17% YoY, making up 71% of physical revenues. CD revenue, meanwhile, continued to decline despite the one-time pandemic boost of a few years ago, down 18% to $483 million in 2022. Synch revenue also grew, up 24.8% to $382.5 million.
“2022 was an impressive year of sustained ‘growth-over-growth’ more than a decade after streaming’s explosion onto the music scene,” RIAA chairman/CEO Mitch Glazier said in a statement accompanying the report. “Continuing that long run, subscription streaming revenues now make up two-thirds of the market with a robust record high $13.3 billion. This long and ongoing arc of success has only been possible thanks to the determined and creative work of record companies fighting to build a healthy streaming economy where artists and rightsholders get paid wherever and whenever their work is used.”
If the price of an individual streaming subscription plan were adjusted for inflation in 2023, it would cost $13.25 instead of roughly $10 a month, Warner Music Group CEO Robert Kyncl said on Wednesday (March 8) — a statistic that doubled as a plea for streaming companies that have yet to raise fees to get in line.
While several of the big music streaming companies — including Apple, Amazon and Deezer — have raised their baseline prices recently, the biggest one of all, Spotify, has so far held off on raising the $9.99 pricetag on its U.S. premium subscription plan. Though Kyncl didn’t specifically address Spotify on Wednesday, when he spoke at the Morgan Stanley Technology, Media & Telecom Conference, he said companies that haven’t raised their prices are playing a role in the undervaluing of music.
“We are the lowest (cost) form of entertainment,” he said. “We have the highest …engagement, highest form of affinity and lowest per hour price. That doesn’t seem right. It should change in an orderly fashion.”
While Kyncl is far from an unbiased commenter on price hikes — music labels stand to gain significant revenues from DSPs raising their subscription prices — Kyncl says the 12 years he spent at YouTube has shown him companies can raise prices if they have a product consumers cherish.
“YouTube TV has grown its subscription from $35 to $70 while growing … because they have a superior product,” Kyncl said.
During the wide-ranging presentation, Kyncl also expressed empathy for executives at TikTok who are at “a company that’s kind of embattled today with lots of different institutions around the world.”
“As someone who’s kind of gone through that, it is much better to have friends and not fight a war on every flank,” he added, recalling the contentious relationship YouTube once had with the music industry.
TikTok is engaged in ongoing negotiations over remuneration to rights holders, a group that includes Warner Music Group (WMG). On Wednesday, Kyncl noted WMG is open to a friendlier dynamic with the popular music discovery tool so long as it works for “both sides.”
“That’s all I look for, fair setup on both sides and to grow a business together,” Kyncl added.
Abu Dhabi-based music streaming company Anghami says its revenues grew by more than 35% to $48 million in 2022, driven by strong growth in paid subscribers, according to a statement the company released sharing its preliminary unaudited results for last year.
The company says its total number of paying subscribers grew 21% year-over-year to 1.52 million, while the overall number of music streams rose by 20% amid growing demand for Anghami’s music content, roughly 60% of which was Arabic-language in 2022.
“Our ability to provide an exceptional user experience and to deliver the best music and entertainment content in the (Middle East and North Africa) region and beyond is reflected in our strong financial performance in 2022,” Anghami CEO Eddy Maroun said in a statement.
As the most popular streaming platform in one of the fastest-growing streaming markets in the world, Anghami says it will achieve profitability later this year. But the company has faced its first public growing pains in recent months in the form of a lawsuit and regulatory reprimand.
In December, U.S.-based publishing company Reservoir Media and its Middle East partner PopArabia sued Anghami for alleged copyright infringement related to a dozen Western and Arabic songs by artists including Lil Jon and 50 Cent. Anghami has defended its payments to rights holders and called the lawsuit baseless and defamatory.
In January, the Nasdaq market exchange, where Anghami is publicly traded, notified the company that it was in violation of a filing rule requiring Anghami to submit a balance sheet and income statement to support its interim results for the second quarter ending June 30, 2022. The company had only submitted a press release with financial results for the period.
The regulatory flag did not affect Anghami’s listing or ability to trade on the exchange, and Anghami apparently remedied the issue this month by filing unaudited condensed financial statements for the first half of 2022 and 2021.
However, in a Feb. 27 filing, Anghami noted that its independent auditor, Ernst & Young Middle East, resigned this year and has been replaced by Grant Thornton. Ernst & Young audited Anghami’s financials for 2021 and 2022 without issue, but did include paragraphs in each of the year’s reports “regarding substantial doubt about Anghami’s ability to continue as a going concern,” Anghami said in the filing.
Grant Thornton is expected to release an audited version of the company’s full-year 2022 results by mid-April.
Spotify unveiled a slew of new features and touted its commitment to music discovery in a sprawling, 90-minute Stream On presentation Wednesday (March 8). CEO Daniel Ek called it “the biggest” transformation the platform has gone through in a decade.
“We hear the same things again and again from the creator community,” Ek told the Stream On audience. “Get me closer to the fans, give me more ways to engage, and help me better monetize.” These three imperatives were the thread that connected the many, many initiatives Spotify extolled on Wednesday.
Vertical Feed, Previews and Pre-Saves
The most noticeable change designed to make Spotify “feel alive,” as Ek put it, was the introduction of the swipe-able vertical feed, which replaces the old static carousels of playlists and recommendations. The new feed is video-based, and it will play previews of music and other audio content, like podcasts and audiobooks, in what Spotify co-president Gustav Soderstrom called “a powerful new way to get that first listen.”
“When I open my homescreen, I won’t have to choose what I might be interested in just based on a cover art that I’ve never seen before, or an episode name I’ve never heard of,” he added. “Instead, I can instantly hear the most interesting part of a song or an episode.”
If the new feed is meant to pique the interest of curious fans, the new pre-save feature allows artists to capitalize on fan interest months before a potential release. Artists have been using third-party technology to run pre-save campaigns for years, but Sulinna Ong, Spotify’s global head of editorial, suggested that Spotify’s pre-save function would resonate in a different way because it’s a dedicated listening service.
“There’s a disconnect between where music is being teased and where music is actually being streamed,” she noted, in what could be interpreted as a subtle shot at TikTok. “The most powerful time to reach fans is when they’ve chosen to engage with music, like when they open up Spotify.”
Fans who pre-save a release will be notified when the song or album comes out. Spotify’s data indicates that 80% of pre-savers return to the platform to stream the song or album during their debut week.
Statistics like these were sprinkled throughout Stream On by the platform’s executives. Sometimes they were testaments to Spotify’s enormous reach, with Ek noting at one point that the platform served more than 10 million creators and enjoyed more than half a billion listeners spread across 184 markets.
In other instances, the numbers served to illustrate the power of Spotify’s tools. “These days, Spotify recommendations drive close to half of all user streams,” Soderstrom said. “Each time your music gets played on a playlist like Release Radar, you receive, on average, three times more streams from that listener over the next six months. And when a listener decides to follow you, they listen to, on average, five times more of your music.”
This, he continued, sets Spotify apart from platforms that deliver “just a fleeting moment of viral fame,” in what sounded like another jab at TikTok.
Discovery Mode and Smart Shuffle
Interested in learning about the effectiveness of Discovery Mode, which allows artists to take a lower royalty rate in order to gain more algorithmic exposure on the platform? Spotify had some numbers to share.
“On average, we’ve seen users save Discovery Mode songs 50% more often, add them to playlists 44% more, and follow the artists 37% more,” said Joe Hadley, the streamer’s global head of artist partnerships and audience. “And that’s just what they see in the song’s first month of Discovery Mode use.” He hinted that the program was especially powerful for new artists by stating that “algorithmic recommendations” are responsible for one-third of all new artist discoveries on Spotify.
Those algorithmic recommendations also factor into Smart Shuffle, a new feature that augments user-created playlists with Spotify’s picks — all of which are informed by the listener’s history. Users often heavily stream these new playlists “for the first several months after creation,” Spotify wrote on its blog. “But over time they stream these playlists less frequently in favor of new music or mixes.” Smart Shuffle aims to “breathe new life” into those old collections of songs by “shuffling tracks and adding new, perfectly tailored suggestions.”
Marquee and Clips
Spotify also cited stats to demonstrate the impact of Marquee, which offers full-screen sponsored recommendations for new releases. “On average, Marquee is 10 times more cost effective at getting listeners to stream your music on Spotify than ads on the most popular social media platforms,” Ong said.
Another feature that Spotify rolled out to a wider user base through Spotify for Artists is called Clips, which lets artists add 30-second videos to their profiles. “We built Clips to give artists a platform that inspires fandom and long-term success, not quick hits of content that just tap into the latest meme,” Spotify explained in a video about the feature. “Clips… help drive metrics that really matter to your career, like saves, follows, and streams.”
Concert Listings and Fans First
Last summer, Spotify announced that it had joined forces with Ticketmaster, AXS and more on a new Live Events Feed that captures “most of the world’s concerts” in major markets. Executives reaffirmed the platform’s commitment to this initiative at Stream On. Ong said that Spotify listed over 840,000 shows last year and promised that, going forward, “personalized concert listings [will be] featured more prominently across the app.”
Hadley picked up the thread, noting the platform will also now surface an artist’s upcoming gigs in the app’s “Now Playing” view. “It’s one of the most powerful places to market your shows and will grab your listeners’ attention right when your music resonates most,” he said, adding that fans can now tap a button marked “Interested” for concert listings, which adds those shows to a personal gig calendar in the app’s Live Events feed.
On top of all this, Spotify announced that it would expand its Fans First program in the U.S., which will ensure that an artist’s top listeners “are first in line for merch exclusives and ticket pre-sales by sending them emails and notifications to let them know when they have special access,” said Ong.
Spotify CEO Daniel Ek has been envisioning this day — the launch of several new features and key changes, presented at the company’s Stream On event in Los Angeles on Wednesday (March 8) — for quite some time. The first iterations of Stream On 2023 existed “about two years ago,” Ek tells Billboard. “We ramped it up seriously, like, 18 months ago, and then 12 months ago, it was like, ‘Wow, okay, we need to bundle this thing, that thing — put it all together now.’”
The result was a series of innovations rolled out simultaneously: a new vertical-swiped homepage with an interactive feed for Spotify’s mobile app; the expansion of video-based tools like Canvas, Spotify Clips and Previews, that rely on looped visuals and exclusive content from artists; greater access to its Discovery Mode program, which trades algorithmic exposure for lower royalty rates; and “countdown pages,” a long-awaited pre-save feature for upcoming albums. Some of these features have been long in the works, and have already drawn comparisons to visual-based platforms like TikTok and Instagram, but the 90-minute upfront (which also included presentations by Spotify co-president/chief product officer/chief technology officer Gustav Söderström, global head of editorial Sulinna Ong and global head of artist partnerships Joe Hadley, among others) was aimed at optimizing the listener experience and amplifying artistic voices on the platform. As Ek directly told creators watching the global livestream: “Spotify is open for business.”
Shortly after the Stream On event, Ek sat down for a rare Q&A about the ambitious rollout, heightened tech competition, acknowledging Geo Z listener habits and not being caught up in the “time on app” craze. (Ed. Note: this interview was been edited for clarity.)
During your Stream On presentation, you spoke about how this is the most dramatic period of innovation for Spotify in a decade. Why now? Why this moment?
I mean, there are so many aspects of this that probably won’t get the spotlight. As an example, and Gustav mentioned this on stage, we’ve kind of rebuilt. We’re known for our Discovery platform, and for how good we are at machine-learning and AI and recommending new stuff. But we’ve actually, underneath the surface, redone that entire system, and meantime, our designers have obviously been tinkering around with the best way of promoting content the best way for discovering content.
And, in the meantime, our artist teams have been expanding our Canvas programs — I think we’re up to 70% of covers on Spotify now having some sort of Canvas. More and more artists were taking advantage of the platform, with lyrics and Canvas and all these things already, and we saw that the more rich storytelling we could do on the platform the better it would be. And then, couple that with this algorithm- and machine-learning you need underneath all of that to be able to do this and have a magical experience, all three of them started coming together. And that was when I said, probably 18 months ago, “Okay, we need to pull all of this together as one — because this will be a massive thing, and we can’t do this as separate parts.”
I think that there are two types of companies when when you’re developing products: One tries to get it all together, and [make] it beautiful. Generally at Spotify, we are more kind of agile — we release things quite early, we test a lot of things, a lot of things don’t work, some things work and we double down on them. But we felt this was such an important step that we needed to kind of like bring it all together and release it as one thing, because otherwise, people wouldn’t understand it, and it wouldn’t get the right reception from consumers, but also — frankly — from creators as well.
You spoke about how “individuality and creativity” are being prioritized by this new interface. How much of that is being driven by the way Gen Z listeners want to engage with music over passive listening — is that a big part of what you’re rolling out?
Absolutely. You’re 100%, right, it’s about looking towards younger consumers for inspiration. And I’m a firm believer in the [William Gibson] quote, “The future is already here — it’s just not very evenly distributed.”
I’ve got two young kids, and quite often, you can just look at your own kids and see what they’re doing, see a glimpse of the future. So that’s definitely been part of it, but I do think that oftentimes, when you look at these types of things, there’s a universal truth in what’s happening here. So yes, younger [listeners] are more interested in visual discovery, and all those things that they’re used to because of all the other apps and platforms and other stuff. But the reality is, if you think about it, in the music industry, when we went from having a radio to MTV, it was a hell of a lot better, and it allowed totally different artists to get a new way of communicating. And that probably meant some artists actually weren’t going to be as successful as MTV took off, but there were other artists that were excellent storytellers visually, too. Michael Jackson’s “Thriller,” how the storytelling came alive — the sort of backstory that came in this music video — that was one way, right?
The truth is, as someone who grew up with MTV — funny side note, I actually learned how to speak English through MTV — I kind of feel like we’ve been relegated to, just press play and listen to the background. But as more and more music became playlists, there are all these artists that I don’t know anything about. I don’t know what they look like, and [have] no idea who they are, how they express their individuality and creativity. And so what we’re announcing today is really a chance for them to tell part of the story of what they want the world to see, as part of who they are, and get a chance to build connection. And when we’ve tested this concept with artists, the response is exactly that. That’s not just among younger [people], but even slightly older people too. When you discover someone, having this sort of richness, being able to see the person, to be able to see their vision come to life, builds that connection.
When you look at how much of this presentation today emphasized video expansion — from Previews to Spotify Clips to extending video with podcasts — how much are these innovations driven by feeling in your gut where things are headed, and how much is driven by competition on other platforms and social media?
A bit of both. I think everyone who says that they’re not inspired by anything that’s going on around them, it’s complete bullshit, to be honest. So I mean, I’ve played around with everything — I play around with the Voice apps, where you can Auto-tune yourself to sound really good. We take inspiration from all of that, of course. But we try to also look at more than just copying features for features’ sake — we try to look for, “What are the needs?”
If you want to find out what Spotify is going to do, it’s actually very simple. All you’ve got to do is look for a big consumer need and a big creator need, and when there’s a win-win between the two of them, that’s when we will do something. It’s really as simple as that. And so that’s the bar for me: is this something that consumers want, first and foremost, because if you don’t want it? It doesn’t matter that the creator wants it — it’s not going to be a great thing. And vice versa: if the consumer wants something, but the creator hates doing it, it’s not going to be sustainable long-term. So you’ve got to try to find out what that middle [ground] is. And a lot of times, I wish I could say that there’s this kind of defining moment, where you sit together in a room and figure it out. It’s not how innovation works, in my opinion. It’s organic.
You mentioned podcasting — we started uploading lots of videos there. Canvas has worked out really well. So it was this natural evolution where we started seeing that visual expression together. One of my fears honestly was like, does that mean we’ll be more like the other platforms? But both because of the types of creators that we have, and also the fact that we don’t expect you to sit two hours in front of that endless screen and watch stuff — we expect you to find something you really like, press play, put it in your pocket, and use that visual way of going from point A to point B faster. We’ve done the algorithms, we’ve done the UX, to do exactly that, opposed to some of these other social platforms that want you to stick around and watch the entire time.
I wanted to ask about something that Gustav said during the presentation that I found really interesting: “Our goal is not to steal time — it’s to help users save time.” There’s so much emphasis across every platform right now of “time spent on app” — getting users from a few seconds with an app open to a few minutes — whereas Spotify wants users to find something they like and then keep it moving.
Yeah, it’s exactly right. I call the concept “nutritious versus delicious.” I feel like everyone’s trying to go towards shorter, shorter, shorter-form content, more bite-sized. And then we have this counter-movement with podcasts, where someone’s willing to listen to two hours of someone going super deep on a very slim topic as well. We obviously want to allow creators to create whatever way they want to do, but out of the two extremes, we’re definitely more in the latter camp. We want creators to really form a connection with their audience rather than just trying to get a viral clip going, and next morning, it could be 50 other people who are successful [instead].
In terms of Discovery Mode, and giving artists a better chance of finding that first play and gaining a new listener — is there any concern of that tool like that losing some efficiency once you open it up to a much wider population of artists, where at some point it becomes to discern what’s worthwhile and what’s noise? Does that tension exist for you?
I mean, there’s absolutely that kind of tension. However, I think this is the beautiful thing — with these algorithms and personalization, we’re not all the same. So the kind of artists you like and the kind of artists I like might be very different. And some of these artists will get exposed to people more like me, and then other artists similar to you will get that exposure. There’s room for all of these things to play together, whereas in the past, you had a commercial radio station that had like 50 or 60 songs on rotation. We can actually cover a lot more than ever before in terms of giving artists exposure, and I think that’s also visible in our numbers.
I talked about onstage the notion that even the 50,000th most-streamed artist, which is kind of far down the list, is still making probably $50,000 across not just Spotify, but across all the other recorded music sources. And if you add touring, if you add all the other stuff, that’s probably a full time musician. It’s a very different music industry today. So I see the tension — and obviously, you’re right, on the long tail of things, it means some people won’t get that attention. But I think on the quality side, we will be good, and we will constantly improve, just like we’ve always had to, to give you better and better recommendations.
You are building Spotify for the long haul, and today was about continuing that building process. I was curious about how you strike the balance between growth and over-extension — finding the right opportunities that make sense for Spotify, without becoming too unwieldy?
I mean, look, it’s not easy, and I wish there was like a silver-lining way to answer it, but I think it comes back to what I talked about. We have three main constituents at Spotify, and two of them are dominant, and the third one, I have to pay attention to. The three main constituents are creators and consumers — they’re the ones that are front and center in everything that we do — and then the third is Spotify itself, my employees, shareholders, all that other stuff. So as I’m working on something, or we’re considering something, it really honestly is as simple as I mentioned: Do I believe that there’s a win-win-win, that gets us there all the faster?
I will probably do stuff that’s great for consumers and great for creators, and not great for Spotify. We’ve done a lot of those things, but I can’t do that endlessly — we’ve got to run a business as well. So it’s about trying to have those three things, the list that every decision goes through. It’s a very simple thing. Is this a win-win for creators and consumers, and will this work out for Spotify? If the answer is yes, then we will do it.
In 2022, about 57,000 artists earned more than $10,000 in royalties from Spotify, the company disclosed Wednesday (March 8) in the latest report published to Loud & Clear, a microsite that provides transparency into the amounts Spotify pays to creators on its platform.
That works out to just 0.6% of artists on Spotify making at least $10,000 in royalties. But using Spotify’s narrow definition of “professional or professionally aspiring” artists, more than a quarter of that group earned more than $10,000 on the platform in 2022.
How did Spotify get to that figure? Of the 9 million artists who have uploaded music to Spotify, 3.4 million have published 10 or more songs. From that group, only 213,000 artists average at least 10,000 monthly listeners, an amount Spotify calls “the beginning of an audience.” For context, newcomer Peyton Parrish, the No. 99 artist on Billboard’s Artist 100 chart, has 1.26 million monthly listeners on Spotify. There were 57,000 artists with at least 120,000 monthly listeners in 2022, according to Loud & Clear.
A similar data point came from Spotify’s integration with Songkick, Ticketmaster and other ticketing platforms: In 2022, 189,000 artists had at least one ticketed concert or event. Spotify says that “demonstrat[es] professional activity outside streaming.”
The number of artists making at least $10,000 on Spotify increased 144%, up from 23,400 in 2017. The upper echelon of Spotify payouts grew at about the same rate: 1,060 artists made more than $1 million in royalties in 2022, a 130% increase from 460 in 2017.
But the growth in the number of artists hitting these mile markers hasn’t kept pace with the overall growth of the platform. From 2017 to 2022, Spotify’s subscriber base grew 189% to 205 million, the number of ad-supported monthly active users rose 217% to 295 million and total revenues (which now includes some podcast advertising) increased 187% to 11.72 billion euros ($12.4 billion).
Spotify has announced the addition of new landing pages designed to help artists promote upcoming releases, including the option to add a pre-save button directly on Spotify.
Dubbed “Countdown Pages,” the new feature also allows artists to tease exclusive content, pre-order merchandise, preview track lists and add a timer counting down to release day all in one place. It was introduced at the company’s Stream On event in Los Angeles on Wednesday (March 8) by global head of artists partnerships and audience Joe Hadley and head of editorial Sulinna Ong, with help from the Jonas Brothers.
The pre-save feature is a long-awaited addition to the streaming platform. For years, artists have been creating their own campaigns via third-party pre-save services to get fans to save upcoming releases to their playlists before they’re released. Many believe that having impressive pre-save statistics can help artists, particularly DIY and emerging talent, receive better consideration for Spotify’s playlists given that a high amount of pre-saves likely indicates high demand.
With Spotify’s new in-house pre-save option, fans who use the feature will get a push notification when the release is out, urging them to come back to the app and stream it. According to Spotify’s own research, over 80% of pre-savers stream the song within its debut week, and the new push notifications may boost this conversion rate.
Beyond the Jonas Brothers, Spotify showed clips of other popular artists endorsing the new feature, including Jennifer Lopez, Karol G, Luke Combs and 6lack.
“There’s a disconnect between where music is being teased and where music is actually being streamed,” said Ong, likely referencing the increased popularity of teasing songs on TikTok. “The most powerful time to reach fans is when they’ve chosen to engage with music, like when they open up Spotify. That’s why we’ve built Countdown pages.”
The Countdown pages will also allow the artist to incorporate Clips — aka short vertical video messages, similar to Instagram and TikTok Stories — to promote upcoming releases. Though Clips are not new on Spotify, the feature was previously limited to specific playlists and top stars. Slated to open up to more artists this spring, Clips can be featured on both Countdown Pages and an artist’s Spotify profile.