Spotify

Last Friday, Spotify unveiled its newest feature: Release Radar – a personalized playlist of newly released music, updated every Friday. It’s reminiscent of Discover Weekly, but Release Radar’s recommendations are always newer tracks. My first impression is that it’s much more likely to recommend music from artists you’re already familiar with.

As Spotify keeps rolling out features like this, and competitors no doubt follow suit, the implications for the music business will be significant. Matt Ogle, who’s behind both of these playlists, revealed last March:

There are 2,000 artists for whom Discover Weekly is currently 80% of their streams, and something like five or six thousand for whom Discover Weekly is half of their streams.

But I’d like to zero in on Spotify’s product strategy and why features like Discover Weekly and Release Radar are so important for the service. It has everything to do with the power of habit.

Habit Loop Spotify

Discover Weekly creates a perfect habit loop. The routine is listening to your refreshed playlist. The reward is the release of good hormones due to interesting new finds, and perhaps the social currency of sharing. The cue, or trigger, is simply the fact that it’s Monday and the start of a new week.

On Sunday, another habit loop is triggered. To prevent losing newly discovered gems, users log on to save tracks from Discover Weekly to their playlists. Loss prevention is one of the strongest motivators.

Spotify Discover Weekly Habit chart

Spotify’s bet is that they can create another habit, focused on different days of the week, by releasing a new feature in the style of Discover Weekly. Being able to consistently drive traffic back to your product is great if you’re ad-supported, might help to convince free users to upgrade to premium, and helps premium users justify the recurring cost of their subscription.

Now, instead of 2, there will be 4 cues.

Spotify Discover Weekly + Release Radar chart

Friday is a great day for Release Radar for two reasons:

Easy to remember: it’s the last day of the week and people have the weekend on their minds.
Since last year, Friday is the global release day for new music.

Here are two hacks I made that bring some cool additional automation to the new Release Radar playlist:

Curious how Release Radar works? The wonderful folks at Hydric Media, who are behind the hit music app Wonder, created a free tool called Playground, which opens up all the different parameters of Spotify’s Echo Nest API powering the Discover Weekly and Release Radar playlists.

How has your Release Radar experience been? I’ll show you mine, if you show me yours. Send me a tweet: @basgras.

Is it fair that a 50-second song costs the same as a 20-minute composition? Back in the days of album-driven sales, track length didn’t matter much. If an album contains 50 tracks of 1 minute each (punk, grindcore), it would sell for roughly same price as an album with 3 tracks lasting 20 minutes each (post-rock, ambient).

Streaming services have changed this. Payouts occur on a per-stream basis. All songs treated equally. This means that if the amount paid per-stream is something like $0.005, Godspeed You! Black Emperor would make just 2 cents every time someone listens to Lift Your Skinny Fists Like Antennas to Heaven (runtime: 1h27m).

Royalty rates are variable and depend on total revenue vs total amount of plays. Spotify uses this formula:

spotify royalty formula

I took a look at Spotify’s top 50, since they publicly communicate the number of playbacks. Assuming a pay-per-stream rate of $0.005, which may differ from reality, I summed the total plays to understand the volume of the royalty pool and the cut each track would take. Then I took into account track lengths and compared the two. The difference for Spotify’s top hits runs into tens of thousands of dollars — per song.

streaming seconds winners

streaming seconds losers

If charts were based on time spent per song, rather than total number of plays per song, here are the biggest risers:

Drake “Controlla” (24 → 15)
Nick Jonas “Close” (32 → 23)
G-Eazy “Me, Myself & I” (35 → 26)

And the biggest fallers:

Mike Perry “The Ocean” (27 → 36)
Shawn Mendes “Treat You Better” (16 → 25)
Major Lazer “Light It Up (Remix)” (15 → 31)

Changes in accounting make a multi-million dollar difference

The top of Spotify’s global chart is not the most important area in terms of implications. The implications are greatest for artists and labels who produce music in genres that are structurally paid less per minute than other genres.

Spotify currently claims to have 100 million monthly active users. 30% of which are subscribers. They’re adding 1.8 million users per month. 80% of Spotify users use it multiple times a week, 25% use Spotify more than 20 days per month. It likely serves over a billion streams daily. Apple Music has13 million paying subscribers. Other services hold millions more of users. All streaming hours and hours of music each month. According to the IFPI, streaming revenues amounted to $2.9 billion in 2015.

Massive pies are being built that need to be split fairly. Music industry analyst Mark Mulligan recently uncovered that indie music’s global market share is closer to 38% rather than the 20% conventionally believed and added:

“This matters not for bragging rights but because in the digital marketplace, market share shapes the deals that are struck, with more market share translating into better terms. So a more accurate measure of share can help the independent sector compete on fairer terms.”

Debates need to occur about market share, pay-per-stream versus time-based royalties, and the way subscription payments are divided. Streaming services are not the ultimate deciders in this: they’re locked into pay-per-stream royalties with the industry through contracts with differing renewal or extension cycles. Therefore, these changes need wide coalitions to occur. It would also help to have a truly competitive music streaming market that nurtures models beyond the typical $10/month all-you-can-eat services.

Streaming is here to stay. It’s a necessary layer for a healthy music landscape. In this landscape, it’s currently very difficult for artists to practice autonomy over the pricing of their music. Two $20 albums of equal length receive completely different payments for the same amount of plays if their track counts differ.

Is that fair?

streaming rates table

Disclaimer: the royalty rate used in this article is based on an assumption and taken from a Billboard article dating back a year. In reality, royalties are slightly more complex eg. through subscribers’ streams counting heavier than ad-supported users’. Any total numbers resulting from using this assumption are therefore completely fictional.

However, even fictional numbers are useful in debating this. Whether the exact number per specific track is smaller or greater doesn’t matter. We’re still talking about how billions of dollars are distributed each year.

Hat tip to Cherie Hu for early feedback and sharing some data points.

Top image: Ocean of Sorrow, a work by Javad Alizadeh (CC/BY/SA).

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