Wasn’t the music industry better off before streaming?

Mar 2, 2023

Spotify plays a leading role in a 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 their 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 that fund Spotify’s Free tier. (We have over 200M Premium subscribers, and 60% of first-time subscribers start out on the Free tier and then later upgrade.)

Based on our analysis of RIAA data, the music industry in the CD era favored superstars twice as much as it does today. At the peak of the CD era, 25% of US sales were accounted for by the top 50 artists. In 2022, only 12% of US streams on Spotify were of the top 50 artists — meaning that revenue opportunities now reach far beyond the biggest stars.

When Spotify launched in 2008, the global recording industry was being ravaged by piracy — spiraling downward from 1999’s peak of over $24 billion in revenue 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. Spotify’s all-time payouts to music rights holders are approaching $40 billion. 

When you consider 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. The IFPI’s 2023 report showed that the global recorded music industry in 2022 has officially surpassed the 1999 peak — reaching $26.2 billion as an industry.