|Type of business||Private|
|Founded||23 April 2006|
|Country of origin||Sweden|
|No. of locations||20|
|Founder(s)||Daniel Ek, Martin Lorentzon|
|Industry||Streaming on-demand media|
|Revenue||$2.18 billion (FY 2015)|
|Alexa rank||126 (December 2017[update])|
|Users||140 million (70 million paying)|
|Launched||7 October 2008|
Spotify is a music, podcast, and video streaming service that was officially launched on 7 October 2008. It is developed by startup Spotify AB in Stockholm, Sweden. It provides DRM–protected content from record labels and media companies. Spotify is a freemium service; basic features are free with advertisements or limitations, while additional features, such as improved streaming quality and music downloads, are offered via paid subscriptions.
Spotify is available in most of Europe, most of the Americas, Australia, New Zealand, and parts of Asia. It is available for most modern devices, including Windows, macOS, and Linux computers, as well as iOS, Windows Phone and Android smartphones and tablets. Music can be browsed through or searched for by parameters such as artist, album, genre, playlist, or record label. Users can create, edit, and share playlists, share tracks on social media, and make playlists with other users. Spotify provides access to more than 30 million songs. As of June 2017, it had more than 140 million monthly active users and more than 70 million paying subscribers as of 4 January 2018.
Spotify pays royalties based on the number of artists' streams as a proportion of total songs streamed on the service, unlike physical or download sales, which pay artists a fixed price per song or album sold. They distribute approximately 70% of total revenue to rights holders, who then pay artists based on their individual agreements. Spotify has faced criticism from artists and producers including Taylor Swift and Thom Yorke of Radiohead, who argued that it does not fairly compensate musicians. Spotify announced in April 2017 that artists will be able to make new album releases exclusively available on the Premium service for a maximum of two weeks if they are part of Universal Music Group and Merlin Network, as part of its efforts to renegotiate new license deals with record labels for a reported interest in going public.
Spotify operates under a freemium business model (basic services are free, while additional features are offered via paid subscriptions). Spotify makes its revenues by selling premium streaming subscriptions to users and advertising placements to third parties.
In December 2013, the company launched a new website, "Spotify for Artists", that explained its business model and revenue data. Spotify gets its content from major record labels as well as independent artists, and pays copyright holders royalties for streamed music. The company pays 70% of its total revenue to rights holders. Spotify for Artists states that the company does not have a fixed per-play rate, instead considers factors such as the user's home country and the individual artist's royalty rate. Rights holders received an average per-play payout between $.006 and $.0084.
Spotify offers an unlimited subscription package, close to the Open Music Model (OMM)—estimated economic equilibrium—for the recording industry. However, the incorporation of digital rights management (DRM) protection diverges from the OMM and competitors such as iTunes Store and Amazon Music that have dropped DRM.
The Spotify for Artists website claims that “a Spotify Premium customer spends 1.6x more per year compared to the average spending of a U.S. music consumer who buys music (not including those who spend $0 on music)", with the annual value of the average U.S. paying listener identified as $120. The website also claims that "a Spotify customer is 1.6x more financially valuable than the average adult non-Spotify U.S. music consumer."
Additionally, the website also includes a section entitled "Spotify's impact on piracy" as a response to the criticisms against the company regarding the exploitation of musicians. Spotify states that it has proven the theory 'given a free and legal alternative, people will pirate less', and uses Sweden, Norway, Denmark, the United States, Netherlands and the United Kingdom to provide evidence. For example, in Norway, the figure of 1.2 billion unauthorized song downloads in 2008 is compared to a figure of 210 million from 2012.
BBC Music Week editor Tim Ingham wrote: "Unlike buying a CD or download, streaming is not a one-off payment. Hundreds of millions of streams of tracks are happening each and every day, which quickly multiplies the potential revenues on offer – and is a constant long-term source of income for artists."
As of June 2016, the three Spotify subscription types, all offering unlimited listening time, are:
|Type||Free of ads||Mobile listening||Enhanced sound quality||Listen offline|
|Spotify Premium[note 1]||Yes||Yes||Yes||Yes|
In March 2014, Spotify introduced a new, discounted Premium subscription tier for active students. Students in the United States enrolled in a university can pay half-price for a Premium subscription. In April 2017, the Students offer was expanded to 33 more countries.
Spotify introduced its Family subscription in October 2014, connecting up to five family members for a shared Premium subscription. Spotify Family was upgraded in May 2016, letting up to six people share a subscription and reducing the price.
In 2007, just after launch, the company made a loss of 31.8 million Swedish kronor ($4.4 million).
Years after growth and expansion, a November 2012 report suggested strong momentum for the company. In 2011, it reported a near US$60 million net loss from revenue of $244 million, while it was expected to generate a net loss of $40 million from revenue of $500 million in 2012.
Another income source was music purchases from within the app, but this was removed in January 2013.
In May 2016, Spotify announced "Sponsored Playlists", a monetization opportunity in which brands are able to specify the audiences they have in mind, with Spotify matching the marketer with suitable music in a playlist.
In September 2016, Spotify announced that it had paid a total of over $5 billion to the music industry. In June 2017, as part of renegotiated licenses with Universal Music Group and Merlin Network, Spotify's financial filings revealed its agreement to pay more than $2 billion in minimum payments over the next two years.
In February 2010, Spotify received a small investment from Founders Fund, where board member Sean Parker was recruited to assist Spotify in "winning the labels over in the world's largest music market".
In June 2011, Spotify secured $100 million of funding, and planned to use this to support its U.S. launch. The new round of funding valued the company at $1 billion.
In April 2015, Spotify began another round of fundraising, with a report from The Wall Street Journal stating it was seeking $400 million, which would value the company at $8.4 billion. The financing was closed in June 2015, with Spotify raising $526 million, at a value of $8.53 billion.
In January 2016, Spotify raised another $500 million through convertible bonds.
In March 2016, Spotify raised $1 billion in financing by debt plus a discount of 20% on shares once the initial public offering (IPO) of shares takes place. The company was, according to TechCrunch, planning to launch on the stock market in 2017, but is instead planning on doing the IPO in 2018 in order to "build up a better balance sheet and work on shifting its business model to improve its margins".
Spotify offers advertisers ten different types of advertising formats, described in their Ad Formats as: Branded Moments, Sponsored Playlists, Sponsored Sessions, Video Takeovers, Audio, Display, Overlay, Homepage Takeovers, Branded Playlists, and Advertiser Pages. These advertisements vary in size, type and user engagement.
Starting in March 2009, Spotify offered music downloads in the United Kingdom, France, and Spain. Users could purchase each track from Spotify, which partnered with 7digital to incorporate the feature. However, the ability to purchase and download music tracks via the app was removed on 4 January 2013.
In November 2015, Spotify introduced a "Fan Insights" panel in limited beta form, letting artists and managers access data on monthly listeners, geographical data, demographic information, music preferences and more. In April 2017, the panel was upgraded to leave beta status, renamed as "Spotify for Artists", and opening up to all artists and managers. Additional features include the ability to get "verified" status with a blue checkmark on an artist's profile, receiving artist support from Spotify, and customizing the profile page with photos and promoting a certain song as their "pick".
In June 2017, Variety reported that Spotify would announce "Secret Genius", a new initiative aimed at highlighting songwriters and producers, and the effect those people have to the music industry and the artists' careers. The new project, which will feature awards, "Songshops" songwriting workshops, curated playlists, and podcasts, is an effort to "shine a light on these people behind the scenes who play such a big role in some of the most important moments of our lives. When the general public hears a song they automatically associate it with the artist who sings it, not the people behind the scenes who make it happen, so we thought the title Secret Genius was appropriate", Spotify's Global Head of Creator Services Troy Carter told Variety. The first awards ceremony will take place in late 2017, and is intended to honor "the top songwriters, producers and publishers in the industry as well as up-and-coming talent". Additionally, as part of "The Ambassador Program", 13 songwriters will each host a Songshop workshop, in which their peers will collaboratively attempt to create a hit song, with the first workshop to take place in Los Angeles sometime in June 2017.
|Developer(s)||Spotify Technology S.A (Spotify AB)|
|Initial release||7 October 2008|
|Written in||Primarily Python, with some Java, C, and C++ components|
|Operating system||Android, iOS, Windows, macOS and Linux|
Spotify has apps available for Windows, macOS, and Linux computers, along with Android, iOS, and Windows Phone smartphones and tablets. It also has a proprietary protocol known as "Spotify Connect", which lets users listen to music through a wide range of entertainment systems, including speakers, receivers, TVs, cars, and smartwatches. Spotify also features a web player, for those who are unable to - or do not want to - download any app. Contrary to the apps, the web player does not have the ability to download music for offline listening. In June 2017, Spotify became available as an app through Windows Store.
On Spotify's apps, music can be browsed or searched for via various parameters, such as artist, album, genre, playlist, or record label. Users can create, edit and share playlists, share tracks on social media, and make playlists with other users. Spotify provides access to over 30 million songs.
In November 2011, Spotify introduced a Spotify Apps service that made it possible for third-party developers to design applications that could be hosted within the Spotify computer software. The applications provided features such as synchronized lyrics, music reviews, and song recommendations. In June 2012, Soundrop became the first Spotify app to attract major funding, receiving $3 million from Spotify investor Northzone. However, after the June 2014 announcement of a Web API that allowed third-party developers to integrate Spotify content in their own web applications, the company discontinued its Spotify Apps platform in October, stating that its new development tools for the Spotify web player fulfilled many of the advantages of the former Spotify Apps service, but "would ensure the Spotify platform remained relevant and easy to develop on, as well as enabling you to build innovative and engaging music experiences".
In April 2012, Spotify introduced a "Spotify Play Button", an embeddable music player that can be added to blogs, websites, or social media profiles, that lets visitors listen to a specific song, playlist or album without leaving the page. The following November, the company began rolling out a web player, with a similar design to its computer programs, but without the requirement of any installation.
In December 2012, Spotify introduced a "Follow" tab and a "Discover" tab, along with a "Collection" section. "Follow" lets users follow artists and friends to see what they are listening to, while "Discover" gives users new releases from their favorite artists, as well as music, review, and concert recommendations based on listening history. Users can add all tracks to a "Collection" section of the app, rather than adding to a specific playlist. The features were announced by CEO Daniel Ek at a press conference, with Ek stating that a common user complaint about the service was that "Spotify is great when you know what music you want to listen to, but not when you don't", adding that "20,000" new songs got added to the service on a daily basis. "You're fighting with 20 million songs on Spotify", Ek stated.
In May 2015, Spotify announced a new Home start page that would serve up recommended music, with recommendations improving over time. The company also introduced "Spotify Running", a feature aimed at improving music while running with music matched to running tempo, and announced that podcasts and videos ("entertainment, news and clips") would be coming to Spotify, along with "Spotify Originals" content. "We’re bringing you a deeper, richer, more immersive Spotify experience", commented CEO Daniel Ek.
In January 2016, Spotify and music annotation service Genius formed a partnership, bringing annotation information from Genius into infocards presented while songs are playing in Spotify. The functionality is limited to select playlists and was only available on Spotify's iOS app at launch, being expanded to the Android app in April 2017.
In May 2017, Spotify introduced Spotify Codes for its mobile apps, a way for users to share specific artists, tracks, playlists or albums with other people. Users find the relevant content to share and press a "soundwave-like barcode" on the display. A camera icon in the apps' search fields lets other users point their device's camera at the code, which takes them to the exact content.
In July 2015, Spotify launched Discover Weekly, a weekly generated playlist, updated on Mondays, that brings users two hours of custom-made music recommendations, mixing a user's personal taste with songs enjoyed by similar listeners. In December 2015, Quartz reported that songs in Discover Weekly playlists had been streamed 1.7 billion times, and Spotify wrote in May 2016 that Discover Weekly had reached "nearly" 5 billion tracks streamed since the July 2015 launch.
In August 2016, Spotify launched Release Radar, a personalized playlist that allows users to stay up-to-date on new music released by artists they listen to the most. It also helps users discover new music, by mixing in other artists' music. The playlist is updated every Friday, and can be a maximum of up to two hours in length.
In September 2016, Spotify introduced Daily Mix, a series of playlists that have "near endless playback" and mixes the user's favorite tracks with new, recommended songs. New users can access Daily Mix after approximately two weeks of listening to music through Spotify. Daily Mixes were only available on the Android and iOS mobile apps at launch, but the feature was later expanded to Spotify's computer app in December 2016.
Spotify has experimented with different limitations to users' listening on the Free service tier.
In April 2011, Spotify announced via a blog post that they would drastically cut the amount of music that free members could access, effective 1 May 2011. The post stated that all free members would be limited to ten hours of music streaming per month, and in addition, individual tracks were limited to five plays. New users were exempt from these changes for six months. In March 2013, the five-play individual track limit was removed for users in the United Kingdom, and media reports stated that users in the United States, Australia and New Zealand never had the limit in the first place.
In December 2013, CEO Daniel Ek announced that Android and iOS smartphone users with the free service tier could listen to music in Shuffle mode, a feature in which users can stream music by specific artists and playlists without being able to pick which songs to hear. Mobile listening previously was not allowed in Spotify Free accounts. Ek stated that "We're giving people the best free music experience in the history of the smartphone."
In January 2014, Spotify removed all time limits for Free users on all platforms, including on computers, which previously had a 10-hour monthly listening limit after a 6-month grace period.
Streams are in the Ogg Vorbis media format at 96 kbit/s for "Normal" quality on mobile, 160 kbit/s for "High" quality on mobile and standard quality on desktop computers and the web player, and 320 kbit/s for "Extreme" quality on mobile and high quality on desktop computers, and is only available for Premium subscribers. "Extreme" quality is not available in Spotify's web player.
Spotify allows users to add local audio files for music not in its catalog into the user's library through Spotify's desktop application, and then allows users to synchronize those music files to Spotify's mobile apps or other computers over the same Wi-Fi network as the primary computer by creating a Spotify playlist, and adding those local audio files to the playlist. Audio files must either be in the .mp3, .mp4 (.mp4 files that have video streams are not supported), or .m4p media formats. This feature is available only for Premium subscribers.
In April 2014, Spotify moved away from the peer-to-peer (P2P) system they had used to distribute music to users. Previously, a desktop user would listen to music from one of three sources: a cached file on the computer, one of Spotify’s servers, or from other subscribers through the P2P system. P2P, a well-established Internet distribution system, served as an alternative that reduced Spotify's server resources and costs. However, Spotify ended the P2P setup in 2014, with Spotify's Alison Bonny telling TorrentFreak: "We’re gradually phasing out the use of our desktop P2P technology which has helped our users enjoy their music both speedily and seamlessly. We’re now at a stage where we can power music delivery through our growing number of servers and ensure our users continue to receive a best-in-class service."
Spotify is currently available across 61 markets worldwide.
|History of expansion|
|10 February 2009|||
|18 May 2010|||
|14 July 2011|||
|12 October 2011|||
|15 November 2011|||
|16 November 2011|||
|13 March 2012|||
|22 May 2012|||
|13 November 2012|||
|12 February 2013|||
|16 April 2013|||
|24 September 2013|||
|12 December 2013|||
|8 April 2014|||
|28 May 2014|||
|30 September 2014|||
|30 March 2016|||
|29 September 2016|||
|22 August 2017|||
Spotify was developed in 2006 by a team at Spotify AB, in Stockholm, Sweden. The company was founded by Daniel Ek, former CTO of Stardoll, and Martin Lorentzon, co-founder of TradeDoubler. The company's title, according to Daniel Ek, was initially misheard from a name shouted by Martin Lorentzon. Later they thought out an etymology of a combination of "spot" and "identify". Spotify Sweden AB, headquartered in Stockholm, Sweden, handles research and development. The company is a subsidiary of Spotify LTD, a company headquartered in London, United Kingdom, which in turn is a subsidiary of Spotify Technology SA, headquartered in Luxembourg. Spotify has offices in 20 countries as of November 2016.
The Spotify application was launched on 7 October 2008. While free accounts remained available by invitation to manage the growth of the service, the launch opened paid subscriptions to everyone. At the same time, Spotify AB announced licensing deals with major music labels.
In February 2009, Spotify opened public registration for the free service tier in the United Kingdom. Registrations surged following the release of the mobile service, leading Spotify to halt registration for the free service in September, returning the UK to an invitation-only policy. Premium cards were offered for the 2009 Christmas season that allowed recipients to upgrade an account to "Premium" status for 1, 3, 6 or 12 months.
For the service's launch in the United States in July 2011, Spotify had a six-month free ad-supported trial period, where new users could listen to an unlimited amount of music. In January 2012, the free trial started expiring, with users limited to ten hours each month and five song replays. In March, Spotify removed all limits on the free service tier indefinitely.
In April 2016, Ek and Lorentzon wrote an open letter to Swedish politicians demanding action in three areas that they claimed hindered the company's ability to recruit top talent as Spotify grows, including access to flexible housing, better education in the programming and development fields, and stock options. Ek and Lorentzon wrote that in order to continue competing in a global economy, politicians needed to respond with new policies, or else thousands of Spotify jobs would be moved from Sweden to the United States. Towards the end of the year, the company launched its "largest [marketing] campaign to date", by placing large-scale billboards in major cities around the world that humorously mocked users' listening habits. Billboards featured commentary such as "Dear person who made a playlist called: ‘One Night Stand With Jeb Bush Like He’s a Bond Girl in a European Casino.’ We have so many questions"; "To the 1,235 guys who loved the “Girls Night” playlist this year, We love you", and "Dear person who played ‘Sorry’ 42 times on Valentine’s Day, What did you do?” Spotify's Chief Marketing Officer Seth Farbman told Creativity that "there has been some debate about whether big data is muting creativity in marketing, but we have turned that on its head ... For us, data inspires and gives an insight into the emotion that people are expressing."
In February 2017, Spotify announced a major expansion of its U.S. operations in Lower Manhattan, New York City, at 4 World Trade Center, into one of its largest operations worldwide, adding approximately 1,000 new Manhattan jobs and retaining 832 existing positions. The company's current U.S. headquarters are located in New York City's Flatiron District.
In October 2015, "Thinking Out Loud" by Ed Sheeran became the first song to pass 500 million streams. A month later, Spotify announced that "Lean On" by Major Lazer and DJ Snake featuring MØ was its most streamed song of all time with over 525 million streams worldwide. In April 2016, Rihanna overtook Justin Bieber to become the biggest artist on Spotify, with 31.3 million monthly active listeners. In May 2016, Rihanna was overtaken by Drake with 3.185 billion total streams. In December 2016, Drake's just-under 26 million monthly listeners were overtaken by the Weeknd's 36.068 million. Later that month, Drake's song "One Dance" became the first song to hit 1 billion streams on Spotify. Upon its release in August 2017, the single "Look What You Made Me Do" by Taylor Swift earned over eight million streams within 24 hours, breaking the record for the most first-day streams for a track.
In March 2011, Spotify announced a customer base of one million paying subscribers across Europe, and by September 2011, the number of paying subscribers had doubled to two million. In August 2012, Time reported 15 million active users, four million being paying Spotify subscribers. User growth continued, reaching 20 million total active users, including 5 million paying customers globally and 1 million paying customers in the United States, in December 2012. By March 2013, the service had 24 million active users, 6 million being paying subscribers, which grew to 40 million users (including 10 million paying) in May 2014, 60 million users (including 15 million paying) in December 2014, 75 million users (20 million paying) in June 2015, 30 million paying subscribers in March 2016, 40 million subscribers in September 2016, and 100 million total users in June 2016.
According to TechCrunch, Spotify was planning to launch on the stock market in 2017, but is instead planning on doing the IPO in 2018 in order to "build up a better balance sheet and work on shifting its business model to improve its margins". As part of its efforts to renegotiate new licensing deals with music labels, Financial Times reported in March 2017 that Spotify and major record labels had agreed that Spotify will restrict some newly released albums to its Premium tier, with Spotify receiving a reduction in royalty fees to do so. Select albums would be available only on the Premium tier for a period of time, before general release. The deal "may be months away from being finalized, but Spotify is said to have cleared this particular clause with major record labels". New reports in April confirmed that Spotify and Universal Music Group had reached an agreement to allow artists part of Universal to limit their new album releases to the Premium service tier for a maximum of two weeks. Spotify CEO Daniel Ek commented that "We know that not every album by every artist should be released the same way, and we’ve worked hard with UMG to develop a new, flexible release policy. Starting today, Universal artists can choose to release new albums on premium only for two weeks, offering subscribers an earlier chance to explore the complete creative work, while the singles are available across Spotify for all our listeners to enjoy". It was announced later in April that this type of agreement would be extended to indie artists signed to the Merlin Network agency.
In March 2014, Spotify announced that it had acquired The Echo Nest, a music intelligence company that has "in depth musical understanding and tools for curation to drive music discovery for millions of users around the globe". In June 2015, Spotify acquired Seed Scientific, a data science consulting firm and analytics company. In a comment to TechCrunch, Spotify said that Seed Scientific's team would lead an Advanced Analytics unit within the company focused on developing data services. In April 2016, Spotify acquired CrowdAlbum, a "startup that collects photos and videos of performances shared on social networks", and would "enhance the development of products that help artists understand, activate, and monetize their audiences". In March 2017, Spotify acquired Sonalytic, an audio detection startup, for an undisclosed amount of money. Spotify stated that Sonalytic will be used to improve the company's personalized playlists, better match songs with compositions, and improve the company's publishing data system. Spotify also acquired MightyTV later in March, an app connected to television streaming services, including Netflix and HBO Go, that recommends content to users. Spotify will mainly be using MightyTV to improve its advertising efforts on the free tier of service. In April 2017, Spotify acquired Mediachain, a blockchain startup with several technologies that can aid Spotify's effort in connecting artists and rights-holders with the tracks on its service. In May 2017, Spotify acquired artificial intelligence startup Niland, and will use its technology to improve its personalization and recommendation features for users. In November 2017, Spotify acquired SoundTrap, an online music studio startup.
In January 2015, Sony announced PlayStation Music, a new music service with Spotify as its exclusive partner. PlayStation Music incorporates the Spotify service into Sony's PlayStation 3 and PlayStation 4 gaming consoles, and Sony Xperia mobile devices, in 41 markets around the world. The service enables users to listen to their favorite tracks while gaming. The new service launched on 30 March 2015.
In March 2017, Spotify announced a partnership with the South by Southwest (SXSW) conference for 2017, presenting specific content in special playlists through a SXSW hub in Spotify's Browse tab in the mobile and desktop apps. The integration also enabled Spotify within the SXSW GO app to help users discover and explore artists performing at the conference. Two more partnerships were announced in March; one with WNYC Studios, and one with Waze. The WNYC Studios partnership will bring various podcasts from WNYC to Spotify, including Note To Self, On the Media and Here's the Thing. Spotify also announced that the third season of WNYC Studios' 2 Dope Queens podcast will premiere with a two-week exclusivity period on the service on 21 March 2017. The podcasts will be available for all Spotify Free and Premium users. The Waze partnership will allow Android app users to view directions to destinations within the Spotify app, and access their Spotify playlists through the Waze app.
In December 2017, Spotify and Tencent's music arm, Tencent Music Entertainment (TME), agreed to swap stakes and make investment in each other's music businesses, forming an alliance in the music industry.
In July 2015, Spotify launched an email campaign to urge its App Store subscribers to cancel their subscriptions and start new ones through its website, bypassing the 30% transaction fee for in-app purchases required for iOS applications by technology company Apple Inc. A later update to the Spotify app on iOS was rejected by Apple, prompting Spotify's general counsel Horacio Gutierrez to write a letter to Apple's then-general counsel Bruce Sewell, stating: "This latest episode raises serious concerns under both U.S. and EU competition law. It continues a troubling pattern of behavior by Apple to exclude and diminish the competitiveness of Spotify on iOS and as a rival to Apple Music, particularly when seen against the backdrop of Apple's previous anticompetitive conduct aimed at Spotify … we cannot stand by as Apple uses the App Store approval process as a weapon to harm competitors."
Sewell responded to the letter: "We find it troubling that you are asking for exemptions to the rules we apply to all developers and are publicly resorting to rumors and half-truths about our service." He also elaborated that "Our guidelines apply equally to all app developers, whether they are game developers, e-book sellers, video-streaming services or digital music distributors; and regardless of whether or not they compete against Apple. We did not alter our behavior or our rules when we introduced our own music streaming service or when Spotify became a competitor". Furthermore, he stated that "There is nothing in Apple’s conduct that ‘amounts to a violation of applicable antitrust laws.’ Far from it. ... I would be happy to facilitate an expeditious review and approval of your app as soon as you provide us with something that is compliant with the App Store’s rules".
The following months, Spotify began efforts to "punish" artists who gave Apple Music exclusives by displaying their content less prominently on Spotify and offering fewer promotional opportunities, and joined several other companies in filing a letter with the European Union's anti-trust body vaguely accusing Apple and Google of "abusing their “privileged position” at the top of the market", by referring to "some" companies as having "transformed into "gatekeepers" rather than "gateways."" The complaint lead to the European Union announcing that it will prepare an initiative by the end of 2017 for a possible law addressing unfair competition practices.
In August 2017, Spotify was the most downloaded music app on the iOS platform in the United States.
Spotify has attracted significant criticism since its 2008 launch. The primary point of criticism centres around what artists, music creators and the media have described as "unsustainable" compensation. Unlike physical sales or legal downloads, which pay artists a fixed price per song or album sold, Spotify pays royalties based on their "market share"—the number of streams for their songs as a proportion of total songs streamed on the service. Spotify distributes approximately 70% of its total revenue to rights-holders, who will then pay artists based on their individual agreements. Multiple artists and bands have given harsh critique to Spotify over its payment policy, with the most notable examples being Thom Yorke and Taylor Swift, two hugely successful artists who withdrew their entire music collections from the service. Their content has since been restored. While the streaming music industry in general faces the same critique about inadequate payments, Spotify, being the leading service, faces particular scrutiny due to its free service tier, allowing users to listen to music for free, though with advertisements between tracks. The free service tier has led to a variety of major album releases being delayed or withdrawn from the service. In response to the allegations about unfair compensation, Spotify claims that it is benefitting the industry by migrating users away from piracy and less monetized platforms to its free service tier, and then encouraging them to upgrade to paid accounts. A study has shown that record labels keep a high amount of the money earned from Spotify, and the CEO of Merlin Network, a representative body for over 10,000 independent labels, has also observed significant yearly growth rates in earnings from Spotify, while clarifying that Spotify pays labels, not artists.
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