The streaming platform unveiled a major upgrade to its mobile free tier earlier today at a press conference (April 24) in New York.
Over the next few weeks, more on-demand elements will be rolled out for ad-supported users – including the ability to select individual tracks in up to 15 different playlists such as Discover Weekly, Rap Caviar and Today’s Top Hits.
That’s in addition to data-saving benefits, increased personalization and other perks.
Spotify underpinned today’s news with one over-riding key message: with a more generous free tier, we can pinch more of radio’s audience, and then convert them into paying customers.
Some may question, of course, whether giving away more stuff to free users may actually lead to fewer people successfully being up-sold to Spotify Premium.
Troy Carter has no such concerns.
He’s certain – and says Spotify has a “ton of R&D and data” to prove it – that a better ad-funded experience will result in good times for the record industry ahead.
Following his newsworthy appearance at today’s Spotify press conference, MBW sat down with Carter, Spotify’s Global Head of Creator Services, for a wide-ranging interview.
We cover topics such as artist royalties, treatment of independent labels, YouTube, windowing and, naturally enough, the balance of free vs. paid…
You said in your presentation that kids who can’t afford $9.99-a-month will now be able to play songs on-demand via Spotify on mobile. Why is that a good thing for the industry?
People who can’t afford $9.99 a month have always been able to play songs on-demand – it’s called piracy!
As an industry we can’t be naive and think that Premium is the only option. There are a lot of options out there for [free] music right now, and we’ve seen where those options take us.
Being able to monetize users through a free experience on Spotify, via ads, is very important.
Also, to bring them all within the same ecosystem; as you’re marketing to fans, you’re selling tickets, you’re selling merchandise. Being able to reach them and know where they are is very important.
“People who can’t afford $9.99 a month have always been able to play songs on-demand – it’s called piracy!”
Where they ‘lived’ previously – the other [free] options – I think as the music industry, we don’t want to see it go back there.
When you look at our numbers, 60% of Premium users were once free users. When you look at the format of streaming, it’s still new to a lot of people. It’s not something where everybody is going to come in, put their credit card down and pay for right away.
We’re seeing a lot of people making that conversion – a lot of people don’t want ads. But for people who won’t convert, and it’s obvious not everyone in the world is going to have a Premium subscription, we see how big the size of the audio ad market is globally.
In the US alone, I think the last [annual] number alone [for audio ads] is around $16bn.
Lyor Cohen recently said that YouTube would be trying to ‘frustrate’ free users on its new service in order to push them to upgrade to Premium. Is that not a strategy you concur with?
I can’t speak on behalf of YouTube and their strategy, but based off our announcement today, people seeing the product, we’re moving in the opposite direction.
It’s not good for any company to make the user experience worse!
We want our users to be satisfied and delighted, and if they want to upgrade to a better version, we’ll give them the ability and the incentive to do that.
How far along are you in your mission to explain to the artist community that this is a new world in terms of their royalties – that they’re getting paid forever rather than in one hit?
At the beginning, people were stuck on the old model of selling CDs; this idea of an album costing $10 or $14.99 or whatever.
Then we saw iTunes come and unbundle [the album], and decide it would be $1.29 for a single track. And there was pushback around that.
Then streaming came along, and it was a per-stream rate, and people looked at that and tried to make a comparison to old album prices. It’s a different model, and it’s a different day.
[Tony] Sal, who manages The Weeknd, was one of my first meetings when I came to Spotify. I sat with him a couple of times, then he called me back one day and said: “I get it. The fact that we get paid for the life of this record is phenomenal. Forget us just getting paid one time off the sale – now we get paid so long as people are streaming.”
I’m a Stevie Wonder fan; I’ve been listening to Songs In The Key Of Life since my late teens, early ’20s. I think I burned a hole in that record.
Now Stevie is able to monetize every time I listen, and every time people who have history with that record listen; you can start looking at the business in a different way.
Is there still a lot of misunderstanding over the topic of royalties in the artist community?
I think it’s amongst a minority. It might be a loud minority at times – a Spotify headline makes for a good headline!
The reality is we’ve paid out over €8bn to [artists and labels] to date. That’s significant.
The [IFPI] numbers came out today [reflecting] Spotify’s contribution to the music industry, and when you look at the overall streaming contribution, it’s huge.
But all artist deals are different. Depending on what your deal is with your record label or distributor, it’s going to determine what your payout is going to be.
It’s an old myth that Spotify doesn’t pay.
We’ve just seen Jason Aldean ‘window’ to Premium-only, but he’s a really rare case. How much demand are you seeing amongst labels and artists to take advantage of windowing, and how much persuading are you having to do in defence of the free tier?
It’s funny. When I came into Spotify, one of the biggest requests from labels was wanting to window albums on Premium-only.
We talked internally and Daniel [Ek] basically said he wasn’t religious about windowing albums. If we wanted to offer that up, it wouldn’t be a problem.
We basically opened the doors and told people: ‘You know what? If you want to do a two-week Premium-only window, we’ll allow you to do it.’
“We basically opened the doors and told people: ‘You know what? if you want to do a two-week Premium-only window, we’ll allow you to do it.'”
I can probably count on one hand the amount that have actually done it. We’ve had these conversations, and we show people the data of how many of their fans are on the free tier, or how many fans they’re able to reach and hopefully convert to their own fans.
If you’re looking for a No.1 album, you want a certain amount of streams. If you’re looking to reach a certain demographic, you want your album on the free tier.
Labels, artists and managers have been really smart in the way they’ve approached it. They understand the value.
A stat that’s caused some debate of late is the idea that 20,000 tracks are added to Spotify every day, as mentioned at your Investor Day. Is it an impossible mission to ensure the best artists from that amount – seven million a year – get ‘picked’ by Spotify for advancement and recommendation?
That’s a lot of songs, right? You can’t expect them all to be great. And the reality is, even prior to Spotify, you’ve got aggregators where people distributed a lot of music.
It was the same thing, maybe not quite at that volume, when you looked at iTunes – a certian amount of tunes will get to the top. It’s the law of averages that weigh out, at the end of the day.
In some cases, the cream naturally rises to the top.
“as an industry, we have to collectively convert the songs that do well into superstar artists.”
But also our editors, who are real music lovers, who thrive on discovery – they’re on blogs, they follow tastemakers, they’re out at clubs – are always looking for what’s next.
When you can couple that with our algorithms, which are scraping for things that are starting to bubble, that’s where we’ve been really good.
Discover Weekly has been a powerful tool in discovering new artists, as has Fresh Finds; all of the data shows us that people are finding more artists to listen to and are engaged with more artists now. We know it’s working.
Yet as an industry, we have to convert the songs that do well into superstar artists; really do a collective job of developing these acts where it’s not just about the songs, but about our collective contribution of building the next generation of superstars.
That’s more my concern than the 20,000 [tracks uploaded each day].
What’s Spotify’s role in turning a hit song into a superstar artist?
It’s a few things. One, we’ve been making a commitment to putting video in playlists.
That additional context – whether artist interviews, behind the scenes, different types of shows – is important.
We also did over 300 Fans First events last year, taking a group of super-fans and introducing them to artists that they follow and are starting to fall in love with. It’s building that connection.
There are a lot of things we’ve already started doing and there are a lot of things we’re thinking about.
I’ve heard some complaints from the independent label community that the majors seem to be able to get tracks on big playlists during release week – but The indies say they more typically have to release a track and prove it’s successful before they get a look-in. Is the playing field unfair?
I think that’s a broad statement. The indie labels have done extremely well on Spotify, and all of the data shows that, [both] in terms of their market share growth, and a lot of personal anecdotes from the indie label community on how well they are doing.
I’ve also watched artists who uploaded their stuff to SoundCloud, it started to do well, and our editors [convince them] to put it in [playlists] when these artists weren’t even signed anywhere on any aggregation service.
If you look at radio, our track record is a lot [more favourable to indies]. It’s hard to get indie artists on radio, or [prioritized within] physical retail for that matter. It’s a development process.
“If you look across 45,000 of [Spotify’s] owned and operated playlists, it’s hard to say that the indie community doesn’t have proper representation.”
If you look across 45,000 of [Spotify’s] owned and operated playlists, it’s hard to say that the indie community doesn’t have proper representation.
And by the way, I get the same complaint from major labels if some of their bigger acts don’t go into Today’s Top Hits or Rap Caviar with their new singles!
We may say to them, ‘Hey, it needs to build in the smaller playlists and get familiarity before we give it to a flagship.’
The IFPI revealed today that the global recorded music business in 2017 turned over $17.3bn. How much growth do you think there’s left in the industry?
Overall, the industry is much bigger than people anticipated at the beginning of the streaming era. Especially coming out of the piracy era.
When you see China in the Top 10 [markets] for the first time, plus the [fact] the industry’s going to see Subsaharan Africa and India [grow revenue] – as well as explosive growth in Latin America right now.
Then when you look at devices providing voice [activation]… music can still become a lot more ubiquitous, and with voice devices we’re going to see a lot more usage in places where there previously may not have been.
I’m bullish about where the overall music industry could potentially go; advertising could follow all of that as well. I’m excited.
Some people think the recorded music industry could double – doesn’t that seem a bit lofty?
My answer here isn’t specific to Spotify – I don’t want to sound forward-leaning. [Spotify is in a fiscal quiet period ahead of its upcoming Q1 earnings.]
But in terms of the overall music industry, even counting the CD heydey, I don’t think we’ve seen its best days yet.
What needs to happen to give the industry the best chance of that growth?
Global expansion is very important: being able to grow in markets like China… China is engaged in building out a healthy music business, and that’s a huge opportunity.
If you can do more of that in places like Africa, where you have this growing youth population; there are going to be a lot more mobile devices than there ever were CD players.
I really don’t think the music industry has seen anywhere close to its best days yet.Music Business Worldwide
