Spotify, And It's One Of A Kind Business Model

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I'm sure many of you use Spotify. Even us fans of football now know about Spotify since they have struck a sponsorship deal with Barcelona. Anyway, Spotify is known to be the go to app for music streaming, and podcasts all around the world. It's literally the top end stuff. And the Spotify premium is really something millions of people pay. But Spotify itself has a story. A story where it was always somewhat hated by its competition. And people connected to the world of music. But people only hate you when they can't reach you. And Spotify has reached new heights which has made them the obvious target for everyone. So let's start at the beginning.

We're in the mid 2000s. At one side there is the famous Napster. An online platform that lets you download music for free. Piracy in other words. And on the other hard there was the then Apple music, iTunes. Basically the core functionality of an iPad back then was iTunes. Listening to hundreds of thousands of music on the go, all for a premium. Except, the premium was a tad bit steep. It was enough to lure people towards Napster because, well, nobody wanted to pay that sort of a premium for something they can get totally free of cost with the only downside being, waiting for it the download and a relatively poorer audio quality. But they still took it. They all considered that Apple was charging too much for the music and it wasn't worth it. Two very different roads. And you know, in these cases, the man who improvises, wins.

So somewhere in Stockholm, Sweden, a guy named Daniel Ek came up with the idea of building something right through the middle. A streaming service that would be convenient just like iTunes, if not better, and that it should be cheaper than iTunes and more close to Napster, price wise. Daniel Ek and his partner actually took this idea seriously. And started making a website that was snappy, easy to use and very convenient to stream music. The first prototype of Spotify was actually filled with pirated songs. Because they didn't have any deals in place with any of the label companies (Sony, universal etc), but they had to show something to the investors.

The investors were actually blown away by the efficiency that this prototype website showed. And soon Spotify started signing deals with artists to put their music on Spotify. They couldn't go for a global deal as they didn't have the money to do so. It was a costly operation. Due to Spotify making these small macro level deals, Spotify wasn't available to the masses right way. It came to USA in 2011, 3 years after launching in middle Europe. But they're slowly getting there. If I'm not wrong Spotify is now available in more than 90% of the countries around the globe.

Spotify holds great power in the music industry. There's a reason why there is the monopoly in Spotify. If you look closely, you'll see Spotify has many playlists they say they made just for you. These playlists are made based on the different moods and environments of people. Their algorithm has that power. And the algorithm which has this much power, easily has the power to push any song up the charts and suggest to users worldwide whenever they like. So if you're a new artist, you have to be on Spotify because there you possess the highest chances of getting listened to and take your art to the masses. For this sole reason, even though Spotify doesn't pay the artists obnoxiously well for all the streams they get, still get on Spotify because, yeah, they need the reach.

Famous singer Taylor Swift complained about Spotify's payment system being inadequate and took her music off the platform. 3 years later she put them back on. This incident alone is enough to explain how powerful Spotify is. Due to these algorithms, Spotify has made a monopoly for themselves. It has even surpassed Apple music in the USA because of their relatively low prices. Apps like Tidal or Apple Music may pay the artists well, but they need to reach more people too. And the dynamic is very much on Spotify's side. 14 years after launching now Spotify are moving on to their next big monopoly, podcasts. The genius entrepreneur Daniel Ek has taken over the music industry with his partner, almost by an iron fist.



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