What makes Spotify a streaming music industry leader?

Spotify is the world’s largest music streaming company with 381m users. During the pandemic when every company was struggling to generate revenue, Spotify stock gained 70%. Currently, Spotify is not profitable whereas its biggest competitor Apple music is making a profit of $4 billion every year. How is Spotify leading in spite of all this?

In the late 90s, there was no existence of a music streaming service. People used to purchase music CDs/DVDs which let them listen to music in a lossless format. When the Internet revolution was in its early stages, Two Coders created a website called NAPSTER, which allowed users to download their favorite artist song effortlessly and listen to it on their personal devices. Napster became a huge success but it hurt the artists as people were listening to their songs not by purchasing but by downloading them for free. As a result, legal sales of CDs were down 9% in 2002. Apple found a solution for this problem by releasing the iPod in 2001. With the launch of the iPod, people could buy artist songs and listen to them on it.

Such was the music industry until 2005. It used to be expensive so people used to download it illegally from the internet. This is the period when Spotify came as a music streaming service. In the year 2006, Daniel Ek with his friend Martin Lorentzon started Spotify. For the first two years, Daniel signed a deal with record labels and music artists to stream their music on Spotify. In 2008, he made it available to the public. How Spotify is leading despite the loss in the market. Let’s take a closer look at what Spotify controls, how it makes money, and how it dominates the market

Now you might be wondering, why does Spotify sell behavioral data, and how does Spotify do so? Before releasing a song, an artist does not know whether his/her song will be a hit or miss. But every artist knows what kind of vibe people like to hear. Artists and record labels do not collect this data. The music streaming network provides this data to the artists. User behavioral data tracks which kind of songs will produce certain types of emotions from you, the type of song you like to share, and the type of song you like to listen to on repeat. In a direct or indirect way, Spotify sells this information to artists and record companies so that they can create tracks that are more likely to be listened to or shared. Spotify’s algorithm is so powerful that it will keep on recommending you new songs based on your data, ensuring you do not abandon the app and spend more time on it. So our data is being sold by Spotify but it does not make money by selling our data to artists. This brings us to the second question, how Spotify makes money?

Natural Language Processor (NLP), Implicit Feedback System, and Collaborative Filtering are the three technologies that power Spotify. Spotify analyses human text and speech using natural language processing (NLP). It scans all of the metadata on the internet, including chats, videos, and blog postings, among other things. Engineers write a program to read and analyze this data in order to learn more about what people are saying about a specific song or artist.

Most of the music streaming services provide the option to rate a song with a star after which the company gets an idea of ​​how good the song is and then their algorithm recommends the song to the users based on the rating. Spotify, on the other hand, doesn’t function that way, it uses a built-in implicit feedback system that tracks how often a user listens to a song over and over again. Based on the listening behavior, the algorithm will determine whether a song is good or awful.

Spotify’s premium subscribers account for 80% of the company’s revenue. Apple Music and Spotify both are priced almost the same then why most of the users prefer Spotify over Apple music.

This is due to the fact that only a small percentage of non-Apple users use Apple Music, and it does not offer free music streaming like Spotify. In comparison to Apple Music, Spotify makes it very easy to share playlists and stream music on any device.

Thank you for taking the time to read this. Please leave a comment and a clap on this post if you enjoyed it. Don’t forget to follow so you don’t miss out on my next article. Continue to share love and kindness, and have a wonderful new year.

Related posts:

Esse artigo possui a finalidade de explicar e simplificar o uso do MobX para gerenciamento de estado no Flutter, e também serve como forma de estudo para mim, pois é meu primeiro artigo falando sobre…

Big data analytics is an amazing tool at the epicenter of the digital revolution. But it’s not foolproof. Here’s how successful companies deal with its potential drawbacks. Big data has a lot to…

CWE and CVE are the two most used terms in the application security space. But, unfortunately, these two terms are the most confusing terms too for application security folks both for developers and…