Spotify was founded as a start-up in 2006 in Stockholm, Sweden, as a legitimate online music-sharing platform alternative to platforms that offered pirated music. After initial problems convincing record labels to share content, in return for the record labels receiving a 20% stake, Spotify was launched in 2008. A decade later, Spotify went public in April 2018, with a market capitalisation of $26.5 billion after the first day of trading. Spotify is now the world’s biggest music streaming platform by the number of subscribers. Spotify is now available in 79 countries. Europe and North America are the largest and second- largest markets for both users and subscribers. However, the fastest growth is occurring in less-established markets. Spotify users from the rest of the world increased by nearly 150%, while growth in Latin America was around 83% in 2016 and 2017 (Figure 2.15). Interestingly, although listeners are widely dispersed, revenues are still highly concentrated, with the US and UK accounting for 48.1% of total revenues (Figure 2.16).
Spotify’s main competitor is Apple Music, a music and video streaming service developed by Apple Inc., which launched on 30 June 2015, in 100 countries worldwide. Users select music to stream to their device on-demand, or they can
Figure 2.15 Spotify user growth by region, 2016-2017. Source: Business Wire.
Figure 2.16 Spotify revenues by region, 2019. Source: Spotify.
listen to existing, curated playlists. In 2016, Apple Music introduced video in 2016 and with the support of its parent company, Apple, Apple Music was able to reach 10 million paying subscribers by 2016, just six months after its launch. By July 2018, Apple Music had overtaken Spotify in terms of paying users in the United States, and the worldwide customer base has increased to 60 million as of June 2019.
YouTube was launched as a video-sharing service in 2005 and quickly became a source for user-uploaded music videos such that YouTube launched a dedicated music app in October 2015. In May 2018, YouTube Music introduced a separate subscription service (positioned as a more direct competitor to Apple Music and Spotify), offering ad-free and background/audio-only streaming, and downloading for offline playback, for music content on YouTube. The service is available in 69 countries at the time of writing, the top countries for YouTube usage being the USA, Brazil, Russia, Japan and the UK, followed closely by Germany, France, Mexico and Turkey (Figure 2.17). However, as YouTube also offers a free ad-paid service, its reach is much larger and it has become a medium for budding artists to reach a global audience, particularly in Asia (Kist and Verboord, 2018).
Impact on record labels
Streaming has also forced record companies to change their business models. No longer must a label own the master tapes of a work. Instead, labels act like venture capitalists, who provide musicians with financial resources as well as a network of support to record tracks and distribute them to audiences. Digital streaming
Figure 2.17 Number of YouTube users by country. Source: Migiro, 2018.
technologies have also created new competitors to traditional record companies who are increasingly finding themselves in competition with independent labels, managers, artists and streaming services. The WINTEL Worldwide Independent Market Report 2018 found that the global market share of independent labels increased to 40% in 2017 (WINTEL, 2018). In other cases, managers are acting as record labels. As one interviewee commented:
A lot of managers are actually acting as the labels in a global context. The manager’s the one who’s actually doing the strategy and using all of the intel in order to plan international global release, sometimes simultaneously.
(Interviewee 18, 2018)
Impact on managers and artists
It is not just record companies’ business models that have changed as a result of digital technology. The roles of managers and artists have also changed. In other cases, with access to online fans, networks and new income streams like crowdfunding and Patreon, some artists are choosing to completely bypass the traditional record companies altogether and distribute their music themselves.
Digitisation of music has also changed the traditional approach which involved the development of a local and/or national base only after which export opportunities are sought. For some of the artists and managers, this is still considered a viable strategy. But in a digital environment, accessing international markets from the outset is proving just as viable. Digital streaming and downloads not only provide copyright owners with much more accurate and up-to-date information on global sales but enable new ways to reach the audience. For instance, one manager interviewed during this study discussed how the ability to monitor sales in real-time has enabled more targeted marketing strategies in key export markets.
We have access in real-time to how strategies are working. Where our markets are. We can, literally, see the time of day that people in Germany are watching ... And how old they are and where they are. All that kind of information. Which is wonderful. So, intensive marketing strategies. It comes in handy when you’re touring. Got to have your presence. So, in terms of effort in formulating that plan, it’s critically important ... You can, literally, show people, this is the artist’s audience. We really want to help you, have you come in to help us grow it. Even before that, you can detect where that is. You can build a team, using that data. Everything’s super transparent... once you’ve got those, you can use it to plot your tour route. Once you’ve plotted that tour route, you can use it to market and sell those tickets. Also, your App. So you research within those markets where you know that the audience is. And you can tailor your marketing strategies to be able to have maximum impact. So, it’s pretty wild. In terms of tech stuff, I’ve just done a big session on AI/VR. I kind of wonder how much more that this is going to be the thing. And when we’re going to chip into the next lot.
(Interview 8, 2018)
According to our survey of artists and managers, social media is now the most used tool in music exports, closely followed by the use of publicists, streaming and attending trade and showcase events (Figure 2.18).
As a result, increasingly artists and managers are looking at global markets from the outset, including the timing of releases in different formats in different markets.
Technology, social media, all of those things, they’re obviously central to the ecosystem that we operate in ... Now we plot global plans for our artists, from the beginning we utilise global strategies to create marketing for even the first song of the first artists, a new artists that we are releasing, it’s less geographically bound than it has ever been.
(Interview 6, 2019)
Streaming has been an even bigger game-changer obviously because the process of how people set up to release music has changed so much. You know, even five to eight years ago the standard process was single, album, single,
Figure 2.18 Marketing tools used. Source: Export strategies survey.
single, album or single, single, maybe one more single, album. And then you go away for two, three years and try and record another opus and, you know, start the process again. Whereas nowadays you can drop a single every second day, you can drop a single, then an album, then an EP, then another album all in one year.
(Interview 1, 2018)