Spotify's Steps Towards Distribution
4 min read

Spotify's Steps Towards Distribution

Hello, y’all! I said it last week but this will be the second to last week of the Dollar Fractions newsletter. I realized that if you haven’t cancelled I’m just going to cancel everyone’s subscriptions next Friday once I send out the last issue. However if there’s some issue then do let me know. Otherwise, let’s just chat a little bit more about Spotify.

Spotify on Wednesday announced a partnership and minor investment into the distributor Distrokid. I mentioned it in my newsletter on Wednesday but I think it’s worth highlighting a little further. Marc Mulligan from Midia Research described it as the following:

Why this relatively small announcement matters, is that it is another piece of Spotify’s strategy of shifting its way up the value chain by a) removing some of the distribution component and b) entering into direct relationships with artists. It’s what west coast tech firms call ‘bring efficiencies into the supply chain’. If it all works, Spotify will get more margin, artists will get more margin, but middle players (labels, distributors etc.) will get squeezed.

I want to break this down a little bit. The opening point around distribution is certainly correct. The fact that you can start your distribution at Spotify and then send music across varying other platforms is certainly a great opportunity for the company and should be a concern to places like SoundCloud or other distributors. Mulligan next suggests this moves brings Spotify closer to artists, which is the big question that sits with me here at the moment looking at this news.

One of the reasons I was initially skeptical, and truthfully remain, over Spotify allowing artists to directly upload to their platform is because it doesn’t allow for bottom-up self-promotion. The only path to success, as outlined by Spotify, is through its playlist lottery system. The hope is that one curator or algorithmic twitch will put an artist’s song in the right Discovery Weekly bucket.

Even though there is often research that will credit Spotify with increasing the amount of music one is exposed to I haven’t seen many results to prove or point to this building a stronger fan base. Instead much of Spotify’s means of discovery is passive and not encouraging fans to directly engage with an artist as can happen on SoundCloud or YouTube. Now that could be shifting as Billboard reported yesterday on an upcoming Spotify update:

On the Home page, users receive recommendations based on recently played music, genre playlists and their heavy rotation. The Search page, rather than a list of recent searches, has been redesigned to showcase a user's top genres with thumbnails to check charts, new releases, radio and podcasts placed prominently underneath. And the Your Library page has been reworked to highlight users' favorite songs, artists, albums playlists and more.

Again these updates appear to burrowing Spotify further down a path of personalization.

Now the question that is raised for me is what exactly is Spotify going to be for artists going forward? There is a strong argument that if Spotify / DistroKid are the go to point for artists uploading their music then that puts so much power in their hands and can slowly box out other distributors and potentially labels. Yet the other side of that argument holds sway for me, because there are thousands of songs being uploaded to Spotify everyday and what is the platform doing to help promote and support artists on their home turf? Right now it looks like meaningful little.

YouTube and SoundCloud continue to offer far more robust community options and even gesturing towards more monetization options. There are many frustrating aspects of music distribution but streamlining that process doesn’t change how little most artists are currently paid in the streaming ecosystem, nor does it attempt to subvert or offer new ways of getting money to artists outside of streaming. Instead this is just a continued doubling down on streaming and personalization.

How Concerned Should Labels Be?

What 2018 has shown is a fairly consistent line that labels are now ready to tussle a bit more with Spotify than they have in previous years. A good reason for that is the rise of Apple Music, Amazon Music coming into the mix, and YouTube Music even if a misguided Spotify-clone is now in the conversation, and not to forget SiriusXM / Pandora. Only four years ago Spotify’s only real competition in the streaming space was YouTube but that’s quickly changed and labels now hold far more streaming partner options.

This can be seen in Apple Music providing “exclusive” playlists by Ministry of Sound and Amazon Music is subtly getting exclusive tracks from artists. There are multiple people competing in the lane Spotify established. Now this is all eventually leading back to Spotify and the major going to the table to negotiate rates and it’ll be an interesting contrast to see how feels has the most leverage. Even if these moves by Spotify were to go off perfectly and they start to just dominate the initial flow of artists and reestablish how artists distribute music I’m not sure that changes labels calculus. Spotify is a, not the only, option in town and maybe its time labels started acting more like that.

Two Weekend Reads

Fortnite is a Video Game Phenomenon the Music Business Could Learn a Thing or Two From Its Success - Music Business Worldwide

I wrote a little bit about Fortnite and the music industry. I’ll admit this is a slightly odd piece but I still think some of the broader points do come through and the fact Tencent owns a minority stake in Epic Games the creator of Fortnite kind of proves my point in how non-western companies are finding a diverse ways to find revenue in digital spaces.

The Battle for the Home - Stratechery

This is from last week but truthfully I didn’t catch this until this week. Ben Thompson just breaks down the home market for smart speakers and by the end wonders a bit if smart speakers will potentially be the next smartphone, or if the smartphone is the last smartphone.