Spotify plays a leading role in this healthier music industry — as a sort of radio station and record store all rolled into one, but without their limitations.
With radio, artists can reach lots of listeners. However, there’s limited space in a radio station’s rotation of songs — they typically stick to the Top 40, making it harder for artists to break through. And in some markets, not all talent is compensated for the music being played.
Artists benefit from a high purchase price in record stores, but physical and digital sales don’t generate money from all of an artist’s fans — only those willing to spend money to download tracks or purchase a full album.
Spotify solves these challenges with streaming. Streaming is where fans come to put their favorite artists on repeat, but it’s also where casual fans discover new music or rediscover old favorites. And revenue is generated from both types of listening—from fans who pay for Spotify Premium to advertisers who fund Spotify’s Free tier.
When Spotify launched in 2008, the global recording industry had been ravaged by piracy — spiraling downward from 1999’s peak of over $25B to the industry’s low point in 2014, when the combined market of physical and digital sales was $14 billion.
Since then, streaming has powered the resurgence of the music industry. In 2019, the total revenue of the recording industry was just over $20 billion — with $11.4 billion of that coming from streaming. And from Spotify alone, last year in 2020, we paid out over $5 billion to rights holders, more than any other streaming service. Last year, Spotify accounted for more than 20% of all recorded music revenue (based on IFPI data) — up from less than 15% in 2017.
When you combine the growth of the overall royalty pool paid out to rights holders — and the expanding number of artists succeeding thanks to streaming — we believe the future is incredibly bright for artists’ careers. At this rate, we think that the music industry will surpass its 1999 peak in 2025 because of streaming royalties.