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Spotify’s Plan To Win Over Anxious Artists–And Win The Streaming War

While the economics of streaming royalties shake out, Spotify is investing in new ways to serve artists’ needs with data, fan-targeting promos, and the power of playlists.

Spotify’s Plan To Win Over Anxious Artists–And Win The Streaming War
[Photo: Unsplash user Austin Neill]

Like a lot of musicians, Scott Hansen was pretty skeptical of Spotify. To Hansen, the mastermind of chilled-out electronic music outfit Tycho, the streaming service and the new era it seemed to herald posed troubling questions: Am I getting paid enough to support myself? Is my craft doomed? Is this whole streaming model even sustainable to begin with?

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Anxious questions like these remain unresolved for many artists as the music industry reshapes itself and streaming becomes its biggest source of income. Thanks to streaming, record labels are finally seeing their revenue grow after years of decline, but the gains don’t always trickle down to musicians and songwriters. Spotify recently settled a $43 million class action lawsuit over royalty payments that went unpaid to certain artists, likely due to a metadata error. In other cases, the royalties flow, but not always in large sums. One of Spotify’s own executives recently conceded publicly that streaming doesn’t pay artists “enough.”

But for an increasing number of artists, including Tycho’s Hansen, the advantages of the streaming era are beginning to come into sharper focus.

“I definitely think we’re in a better place than we were three years ago, that’s for sure,” says Hansen, by phone from somewhere outside Cologne, a stop on the group’s recent European tour. The tour’s been a big success, he says, something he attributes, in part, to an experimental marketing project at Spotify. (The group’s recent Grammy nomination likely didn’t hurt either.) By aiming emails at listeners who seemed likely to care the most about their music, the program helped the group sell about 1,600 tickets in Europe, Hansen says, and a total of more than 4,000 tickets this year. “I see it getting better as more people adopt that way of consuming music,” says Hansen.

Early sales—along with listener location data—also informed the band’s decision to extend its tour to more European cities than they typically play. In a career first for the band, its entire European tour sold out. “This European leg has just been crazy.”

Amid a slow growth in royalty payouts, Spotify is investing in a range of projects aimed at keeping artists happy, mostly by leveraging the company’s huge goldmine of listener data. The effort includes new metrics tools for musicians, steadily improving fan targeting, and a range of curated and algorithmic playlists to help artists reach new listeners.

It’s the beginning of a new era, powered as much by musicians, managers, and curators as by big data and machine learning. “It’s kind of a golden age for artists at this point,” Hansen says. “You have everyone consuming via a monetizable platform, as opposed to the wild west scenario that we had five years ago.”

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As Spotify seeks to build better relationships with record companies and music publishers—and as artists seek new sources of cash—the company’s executives and artists say the efforts are already helping, providing precise data to help artists make smarter career decisions, and leading to bigger ticket and merchandise sales. Collectively, the company says, the relatively young effort has generated millions in additional revenue for musicians–results that, after years of industry upheaval, are hard to ignore.

Spotify’s artist-focused initiatives aren’t sheer acts of generosity, of course: They also have a direct bearing on the company’s future success as a business. The Stockholm-based firm, last valued at $8 billion in 2015, boasts 50 million paying subscribers but steep losses ever since it was founded a decade ago. And the competition, which increasingly comes from tech giants like Apple, Google, and Amazon, is fierce.

The more indispensable Spotify becomes to creatives, the stronger its leverage in negotiations with record labels. The company is currently in the long-awaited process of renegotiating deals with labels and rights holders, who are anxious for better terms. But like every other streaming platform, it’s eager to shift the basic math of the new music economy further in its own favor, especially as it prepares to go public later this year. It also doesn’t hurt that a more artist-friendly posture can help improve its public image in the wake of famously critical jabs from the likes of Taylor Swift and Thom Yorke.

Tracking And Targeting Binge Listeners

The negative attention around the streaming industry has led to a small cold war between platforms, as they try to one-up each other with pitches designed to make artists feel at ease about the future, and, of course, attract us listeners with star power. Apple Music and Tidal have famously made an artist-friendly vibe central to their marketing efforts, while Pandora is repositioning itself as a platform that caters to musicians as much as it does to fans.

Rather than paying massive sums to score exclusive new albums like Tidal and Apple, Spotify prefers to use its reach as a promotional vehicle for new releases. Recent partnerships with The Weeknd and Katy Perry included a heavy push for the artists’ latest albums in the form of artist-focused playlists, prominent (even excessive, some might argue) placement within the Spotify app, targeted emails notifying fans of the album releases, Facebook ads, and a billboard campaign.

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Of course, not every artist can realistically expect this kind of free marketing push from Spotify. In an attempt to build stronger personal ties to the recording industry, promote and develop artists on Spotify, and bolster the company’s artist-facing tools, Spotify hired investor and former Lady Gaga manager Troy Carter last year as its global head of creator services. Carter’s job, interfacing with artists, managers, and labels, is about being “better partners,” he says “whether it’s helping you co-market a product on our platform, helping you understand how the international market works, or how our playlisting works.”

Troy Carter, Lady Gaga’s former manager, is Spotify’s Global Head of Creator Services

With the help of Spotify, Tycho, which has 1.2 million monthly listeners on the service, has seen the long-envisioned promise of streaming begin to bear out: Paltry per-stream royalties can add up. “We do better than we were doing in album sales a few years ago, that’s for sure,” Hansen says of his band’s income from streaming. During the second half of 2016, Tycho saw 53% of their revenue come from Spotify. But Tycho is one of the lucky ones.

With the average per-stream royalty rate stuck at a fraction of a cent, most artists still struggle to scrape together enough cash from streaming royalties to get by. While services like Spotify pay the vast majority of their revenue to record labels and rights holders, complex math sits in the middle of the equation, dictating–in conjunction with the amount of streams an artist gets–how much money out of Spotify’s earnings ultimately trickles down to songwriters and artists.

Tycho

Spotify’s beta email targeting project, Fans First, is aimed at improving that equation for artists. Using data to identify the band’s most obsessive listeners in specific locations, the project is able to target potential ticket-buyers via email with special offers–in this case, the option to buy pre-sale concert tickets before they’re available elsewhere. Spotify has already opened the service to a few hundred acts, and continues to expand it.

Again, Tycho has been one of the lucky ones. “Scandinavia is a place we’ve never really done much,” says Hansen, guessing the band had played “in front of a total of 600 people there in our whole career.” After spreading the word about upcoming shows through Fans First, though, “we sold out three nights in a row at medium-to-large size venues.”

“We’re always looking for the person that doesn’t know the concert is in town,” says Bryan Duquette, who manages Tycho and also works as a concert promoter in the San Francisco Bay Area. “A lot of people who aren’t seeing print ads or hearing ads on traditional radio have no idea artists are coming through town, but they’re listening to them two or three times per week.”

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For promoters and managers, this level of insight is incredibly valuable. The data, combined with Spotify’s massive reach (it has 100 million listeners), offers something that no stakeholder in the old music industry–not managers, big labels, concert venues, or anybody else–could have ever dreamed of providing: a real-time, direct, and reciprocal fan-to-artist relationship that can yield some demonstrably meaningful results.

While email marketers are typically lucky to see a quarter of recipients open their messages, let alone click-through rates higher than 3%, according to industry benchmark statistics, Spotify boasts more impressive numbers: its campaigns have seen an average email open rate of 40%, with about 17% of recipients actually clicking on the link inside.

An example of a Fans First campaign email sent to fans of Thurston Moore.

“As a promoter, I love when Spotify gets involved, because I know that they’re adding a marketing element that we wouldn’t have,” says Duquette. “With [the band] Alabama Shakes, for example, we didn’t have access to their super-fans in a given area when they toured. But Spotify did.”

Concert listing and ticketing apps like Songkick, Bandsintown, and Pandora’s TicketFly have already mastered the art of alerting music fans to upcoming shows. And platforms like Tidal and Pandora have run a few ticket pre-sale campaigns of their own. But Spotify is able to super-charge the practice with more granular data about listening habits and an expanding artist relations effort that enables them to offer more than just standard concert tickets.


Related: Inside Spotify’s Plan To Take On Apple Music, Why Spotify’s Discover Weekly Playlists Are Such A Hit, Inside Pandora’s Plan To Reinvent Itself–And Beat Back Apple And Spotify


Spotify’s Fans First program is also being used to sell exclusive merch and offer invites to special events. Last year, Spotify pressed a limited edition green vinyl EP by The Strokes and offered it exclusively to the band’s top listeners on the platform. It sold out within an hour. Other merchandise offers made through the program include perks from Vince Staples, Red Hot Chili Peppers, and Run the Jewels.

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“Right now, we’re seeing that we can help generate about $40,000 per individual Fans First campaign for a full tour,” says Shane Tobin, Spotify’s head of creator insights and activations. “We’re generating tens of millions of dollars in gross revenue for these artists.”

Shane Tobin

Numbers like may this sound impressive, but they still leave smaller, independent, less-known artists continuing to wonder: What’s in it for us? Tobin is hoping to start answering that question soon.

Spotify says it’s now figuring out to scale its Fans First initiative to more musicians. Right now, each campaign is born out of discussions between Spotify’s creator services department and artists’ teams, and then crafted to meet an agreed-upon goal–selling tickets, hocking merch, or letting super fans skip the line at Spotify’s SXSW showcases. What works for Guns ‘n’ Roses probably won’t make sense for an up-and-coming dream pop songwriter who needs to book a tour or sell merchandise to offset their recording costs. Whatever shape these artist-facing services may take, they’ll be built on top one common feature: a mountain of listener data.

“There are a lot of different things that we’re thinking about, in terms of tools that we could potentially offer to developing artists. We’re also thinking about how we can bundle some of these services together,” says Tobin.

https://youtu.be/pDTjlsAsSOE

“Apple Will Never Reveal Any Numbers. With Spotify, All Cards Are On The Table.”

Another obvious way to help musicians, especially those without household name recognition, multi-million dollar contracts, or substantial royalties: Give them direct access to the data. The company recently opened up Spotify For Artists, a new analytics dashboard for artists and their managers. Developed over a 16-month beta period, the dashboard breaks down an artist’s listeners by geography, demographics, and loyalty.

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By mapping fans and super-fans across cities, for instance, Spotify can help managers and musicians plot their tours in a much more informed and lower-risk fashion. It may even reveal opportunities that musicians may not have otherwise thought about. If an indie rock band from Michigan gets music blog traction and their Spotify plays spike in New York and Philadelphia, perhaps a small summer tour along the East Coast is worth the gamble.

Spotify isn’t the only company peddling music data to artists, but its offerings—thanks in large part to its size—are probably the most comprehensive. Pandora, which beat Spotify to the concert pre-sale game with 2015 campaigns for The Rolling Stones and Odezsa, is using recent acquisitions of ticket-selling app TicketFly and music data service NextBigSound to further flex its data muscles in artist-focused ways. Apple Music, which reportedly pays the highest royalty rates, also makes some listening analytics available to artists through third parties, such as the label services and music publishing company Kobalt. But the two-year-old music service has been relatively shy about sharing its data.

“I’ve sat with Apple Music and the big difference is that Apple will never reveal any numbers,” says Brandon Ginsberg, an artist manager at Red Light Management. “There’s no conversation there. With Spotify, all cards are on the table.”

That’s the type of selling point Spotify hopes will resonate with uncertain artists. In an era when musicians are expected to play a more hands-on, entrepreneurial role in growing their own careers—with or without the help of a label—data can remove some of the friction and mystery from the decision making processes.

“This is something we’ve never been able to do before in the music business,” says Carter. When listeners buy merchandise online, of course, sellers know a lot more about them. “When you’re selling merch at a concert, there’s no way of knowing exactly who bought that piece of merch. Even going to a concert, you don’t know who bought that ticket.”

Spotify’s creator services team is already fielding requests for more metrics. Regional listening data charts make it easy to sketch out locations for tour routes, but a savvy artist may also want to overlay a map of how much money they made in each of those markets on their last tour, for example, or tie listening data to social media analytics to learn more about new fans.

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Scott Hansen of Tycho in the studio.
Scott Hansen of Tycho in the studio.

How Spotify’s Quiet, Hit-Making Playlists Work

Spotify’s popular playlists don’t just help guide you through an endless sea of music to music you might like and keep you listening longer: They’ve also become a prized tool in Spotify’s arsenal for promoting upcoming artists.

Being included on a high-follower playlist can result in a massive spike in streams for an artist, with or without a label. Famously, Lorde’s 2013 breakthrough hit “Royals” was propelled to popularity by its inclusion on a popular Spotify playlist. As Spotify has grown, this effect has been dramatically amplified. In some cases, flashes of streaming success can nudge budding careers toward major milestones like recording contracts. Australian singer-songwriter Starley signed with Epic Records after making the Spotify playlist rounds and skyrocketing to over 2 million daily streams.

The power of playlists—governed by both humans and algorithms—has also become a source of competitive tension. Pandora pretty much invented personalized internet radio, fueled by algorithms built on top of human knowledge about music. Since then, music services like Google Play, Deezer, and iHeartRadio have all taken a crack at discovery using some blend of human and machine smarts. Apple, Spotify’s fiercest competition, sets itself apart by betting on the wisdom of real people: it combines its army of skilled playlist curators and the more traditional, FM radio-style approach of Beats 1. Indeed, if there’s one thing that makes Apple Music compelling, it’s music curation.

Spotify was well-armed to weather the threat posed by Apple’s mid-2015 launch. The previous year, the company made a fortunately timed acquisition when it snatched up the Echo Nest, a music intelligence data platform used to power the Pandora-style “radio” feature on a number of different music apps. This gave Spotify a team of high-caliber engineers at the forefront of fields like machine listening and data science, and the technology required to power a new generation of algorithmic music recommendation features. At the same time, the company was busy hiring its own team of in-house music editors.

The company’s team of over 50 music programmers spend their days hand-crafting and maintaining playlists based on genre, mood, activity, decade, and other themes. These in-house playlists–which are different from user-created playlists or the ones operated by record labels–are maintained by editors and genre specialists who populate them through a combination of external pitches from labels and managers and their own gut intuition.

“It’s a global team contributing to breaking down borders and finding music from every corner,” says Doug Ford, the company’s director of playlists and editorial for North America. “We’re like the elected officials of Spotify.”

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Often, songs come from real-world experiences, like when curators see a new artist perform live or hear something good blasting from a passing car. Spotify touts its system as a purely democratic operation, having explicitly banned “playola”–the practice of paying for placement on playlists–in 2015 after press reports suggested a pay-for-play culture was developing around the streaming business’s playlists.

“The idea was to build these networks and prove that we can move songs along the path of discovery and break artists and break songs,” Ford explains. “Every step of the process is very intentional.”

Doug Ford [Photo: Celine Grouard for Fast Company]
Spotify’s in-house playlists have a multi-tier hierarchy broken down primarily by genre. Top-tier playlists—its “mega channels,” Ford calls them—like Today’s Top Hits (14 million followers) and Rap Caviar (6 million) are run by genre-specialized curators, typically with backgrounds in radio or music television. These sit atop a network of smaller playlists, like more niche genre collections, regional lists of songs and incubator playlists that let curators take early bets on potential hits and see how listeners respond. In total, 4,500 company-curated playlists collectively generate over 1 billion streams every week, the company says.

Lauv, an unsigned musician and then-student at New York University, had his song “The Other” picked up by a Spotify playlist editor in late 2016. The track quickly rose up the curation ranks and went from 20,000 daily streams to over 730,000 daily streams. To date, Lauv has amassed 45 million streams, all without major label support.

Related: Five Steps To Becoming a Successful Artist on Spotify 

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These company playlists operate side by side with its more data-driven, personalized ones. Most notably, the company’s Discover Weekly feature—a list of 30 auto-selected songs based on a combined analysis of one’s musical taste and patterns in the playlisting habits of Spotify power users—exploded to 40 million listeners in its first 10 months. According to Spotify, more than 8,000 artists saw at least half of their listens come from Discover Weekly during its first year alone.

“For artists, it’s moving the needle in a really fundamental way,” says Matt Ogle, the product director at Spotify who oversaw Discover Weekly before leaving in May to work at Instagram. “Artists are seeing this net lift of new listeners that they weren’t getting through any other channel before.”

Matt Ogle [Photo: Celine Grouard for Fast Company]
The Cincinnati garage-rock band Heartless Bastards, for instance, recently saw its overall streams increase by 24% over the course of one month, thanks to Discover Weekly. The playlist also drove a 17% boost in streams for singer-songwriter Moxie Raia, and a 16% boost in listeners for the synth pop band Panama Wedding.

After the success of Discover Weekly, Spotify’s product team wove similar logic into other areas of the app. Release Radar is a personalized list of recently released songs and Your Daily Mix effectively supercharges the shuffle button, focusing on favorite tracks and injecting Discover Weekly-style recommendations into the mix. Fresh Finds, another weekly-updated playlist, derives its songs from algorithms that crawl music blogs and other web sources to sniff out the rising tide of buzz surrounding new songs and artists. This allows artists to get a shot at streaming stardom organically by simply creating music and promoting it online.

“We’ve routinely seen artists go from 400 listeners to 40,000 listeners through Fresh Finds in the space of a couple weeks,” says Ogle.

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What often winds up happening, Ford explains, is that a listening spike from Discover Weekly or Fresh Finds tips off the company’s editorial team to new music and they’ll include it on one of the in-house playlists. These three flavors of curation combine to create a few different funnels–either by being hand-picked by a flesh-and-blood editor or scooped up organically from the Fresh Finds web crawler–for artists to enter and rise through the ranks.

“I envision it as this beautiful cycle, working together,” says Ford. “Data informing curation, informing data, informing curation. And data informing what’s working and not working for the listeners as a whole.”

Matt Ogle, the former product director at Spotify who previously oversaw Discover Weekly and other personalized playlists, and Doug Ford, the company’s director of playlists and editorial for North America. [Photo: Celine Grouard for Fast Company]

From Playlist To Tour

Last year, a dance-friendly electronic pop duo called Frenship saw their single “Capsize” unexpectedly picked up by one of Spotify’s pop playlists. The song performed well, quickly breaking 1 million streams, and started climbing up the hierarchy to other lists, eventually landing on the New Music Friday and Weekly Buzz playlists and competing with artists like Drake in the performance metrics.

“It was insane,” says Brandon Ginsberg, who manages the band. “It could take years to get to a million streams for a lot of artists. We were like, ‘Who’s behind this? What’s going on?'”

Somewhere just shy of 180 million streams, record labels started calling. Having already proven their viability with viral success on Spotify, Frenship and their management were well-positioned to choose the best path forward, be it a record label, label services company, or forgoing a contract all together. In May 2016, the band signed to Columbia Records and started booking a 50-date North American tour.

“It’s actually creating this sort of conveyor belt that basically onboards new artists,” says Ogle of the combination of automated and human-curated playlists. “And then at each step if their stuff is good and fans respond to it we amplify that and it just keeps spreading and spreading.”

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Spotify has also experimented with booking its own concerts, using its trove of data to pick artists and invite fans. Last year, it turned the basement of its Boston office into a venue and hosted an intimate Fresh Finds showcase featuring bands who had recently landed on the playlist. Then it mined local listening metrics to find local people who binged on these new acts and invited them to the show. Using data as a bridge between digital and physical spaces, Spotify was able to provide an experience for both the artists and their fans that likely would not have happened otherwise.

“A corporate concert, it always feels a little bit like you have to get on the mic and be like, ‘Yeah Spotify!’ or whatever,” Ogle says. “But there was none of that. They were just so happy to be there and to connect with their fans that had come to the show.”

The showcase was a small-scale, one-off experiment, but Ogle doesn’t rule out the possibility of Spotify getting more into data-driven show booking in the future.

“It was really gratifying to see it genuinely making a difference in these artists’ lives, especially when you hear all the stories about the new music economy being a horror show,” he says.

Like Fans First and its other artist-empowering initiatives, Spotify’s early efforts are neither perfect nor comprehensive. But amid Spotify’s fight against deep-pocketed competitors like Apple and its race to its stock market debut later this year—along with ongoing royalty negotiations with the record industry—the project reflects a larger paradigm shift around the music business: With fewer royalties, artists will be “paid” in increasing mountains of our listening data. It’s a tectonic transition that leaves musicians, perhaps first among many, guessing about the future.

“It is hard,” says Ogle of the music industry’s transformation. “It’s still being built and rebuilt. And there’s a lot of bumps on the road. But it was nice to see computer programs making a difference in art.”

About the author

John Paul Titlow is a writer at Fast Company focused on music and technology, among other things.

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