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How Spotify beat Apple at their own game - YouTube
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in the description
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in life there are some hard questions
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like pepsi or coke or iphone
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android mac versus pc but when it comes
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to music and podcasts
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it seems the answer is pretty clear
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spotify is
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king how did this small company beat out
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giants like apple at their own game
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we'll tell you all about it
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in this episode of company forensics
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the origins in 2006 back when listening
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to music was either expensive or illegal
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swedish entrepreneurs daniel eck and
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martin lawrenson wanted to make music
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more accessible
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through streaming so spotify was born
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but they needed to have
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record labels on their side otherwise
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the app would have very little to offer
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fortunately the music industry also
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needed to shed the vestiges of the past
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eck asked the labels to open up and they
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did at a price
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by 2009 multiple record labels owned 20
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of the company but for spotify this
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meant
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money and guarantee that spotify would
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have mainstream
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music they launched in 2008 with both a
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free service and a paid subscription
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but spotify got their big boost in 2009
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when mark zuckerberg updated his
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facebook status with
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spotify is so good at that time spotify
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wasn't even available in the us
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talk about hype lee cashing one of
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facebook's leading
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investors had his eyes set on the app
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and zuckerberg was trying to venture
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into music
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spotify finally launched in the us in
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2011 but with reduced
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features for free users you see the four
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major labels in the u.s believed in
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spotify but they wanted it to be solely
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for paid users
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in the us which wasn't feasible in
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spotify's view the company took to other
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strategies such as an integration with
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facebook
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as people could now use their profiles
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to create spotify accounts in seconds
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however competition in the us was fierce
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with software like pandora or rhapsody
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and last fm success and problems
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let's take pandora it was a free music
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streaming service that relied heavily on
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ads
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spotify on the other hand offered a paid
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membership which eliminated ads
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behind plenty of features and a smooth
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engaging platform was x
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obsession with excellence he wanted the
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best
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listening experience to convince users
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to pay the monthly 10 bucks
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after all that's how he had gotten 1
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million paying subscribers by march
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2011.
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he aimed to replicate that success in
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the us while ad-free music
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is the best music spotify also offered
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more mobile tools like playlists and
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storing songs which pandora didn't
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and the us loved it the app went from 1
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million
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paying users in march of 2011 to 2
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million by september of that year the
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brand also became a staple in american
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culture
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barack obama launched his playlist
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before the 2012 election coca-cola
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partnered with the giant and even
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metallica
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launched its entire catalog on spotify
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all this meant
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that by december of 2012 spotify already
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had 1 million pain subscribers
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in the us alone but democratizing music
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as ek once said wasn't a smooth ride
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especially for artists you see
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spotify pays the owner of the rights
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about 0.006
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dollars to 0.0084 per play the owner
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then splits up the money between the
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label
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artists producers etc artists didn't
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like that in 2011
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adele and spotify couldn't agree on the
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release of her album 21 so the singer
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chose rhapsody instead
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exclusively for paying subscribers other
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big names like tool and tom york have
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criticized spotify
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for weakening the already bleak
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opportunities artists have
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just to earn approximately minimum wage
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an artist would need 400 000
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streams per month perhaps the biggest
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feud was with taylor swift
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in 2014 she didn't release her album
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1989 on spotify
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then removed her entire catalog from
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spotify the main issue being spotify's
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free tier
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instead she released 1989 on jay-z's
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title a paid service then in 2015 apple
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music announced
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three months free trials with artists
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receiving no royalties from those trials
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and she was pissed apple listened and
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dished out
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royalties but spotify was becoming a big
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name
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it had gone from 10 million paying users
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in 2014
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to 50 million by 2017. that's hard to
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ignore even adele released her album 25
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on spotify so universal music group
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swift's distributor negotiated to allow
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artists to choose
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windows of exclusivity for new releases
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taylor swift and back to spotify and it
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all seems fine for now
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but keep this exclusivity issue on hand
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for later
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then the facebook alliance garnered
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criticism as new users had no choice but
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to use their facebook account to create
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a spotify account
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which wasn't appealing at all spotify
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eventually yielded it but then through
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open graph
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activity between spotify and facebook
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became more visible the songs you
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listened to
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now appeared on the revamped feed many
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articles
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popped up explaining how to separate the
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two programs as much as possible
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it seemed people didn't enjoy publicly
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displaying their guilty pleasures
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and now let's talk about apple spotify
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versus apple
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apple is a big player we all know that
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but it doesn't have all the tricks up
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its sleeve
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people want to feel unique and spotify
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understood that so they created
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the wrapped year in review every year
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spotify reminds you of musical genetics
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your favorite songs
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artists and podcasts it also allows you
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to share your results on instagram
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twitter and other social media apple
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music users on the other hand
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can't quite do the same they do have a
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year and summary
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but it's not as shareable or interactive
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such as the wrapped success
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some apple music users questioned their
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loyalty and their friends
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supported the idea here's the
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exclusivity issue again
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apple music traditionally worked to
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great success with exclusive content
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with artists like frank ocean
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drake and taylor swift drake even broke
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several records by having
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views album only in apple music except
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four songs
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for a determined period but the music
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industry had a love-hate relationship
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with exclusivity as it affects revenue
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yes a launch with apple means heaps of
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dedicated marketing but fewer listeners
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in the end
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artists like kanye west criticized this
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saying exclusivity was
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[聽__聽] up the music game a game in
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which spotify had around 42
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market share in the music streaming
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industry in 2017
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and it's not like spotify isn't willing
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to work with exclusivity as we've seen
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but this company beats giants like
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amazon google and apple
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how well it's about numbers and features
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spotify changed the way people consumed
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music through several critical elements
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it was no longer about a long-awaited
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album
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but rather a steady flow of unlimited
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music that appealed explicitly to each
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listener
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take the discover feature a series of
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machine generated playlists that follow
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a carefully constructed
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process in which spotify takes what you
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listen to regularly
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and looks to other users and their
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listening history to match those songs
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then it navigates the web to gather more
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information about specific songs and
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lyrics
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finally it analyzes the songs you hear
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to find similar tracks in tempo
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beat and genre in a 2017 internal report
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spotify stated that machine generated
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playlists comprised
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more than 30 of all listening activities
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so spotify pretty much has figured
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you out don't be shocked if it
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recommends therapy when you play
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sad songs over and over again and
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artificial intelligence
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doesn't end with music podcasts
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2020 has seen the rise of other forms of
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entertainment mainly due to the lockdown
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one of which is the podcast on a
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year-on-year basis spotify podcast
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mentions have increased by 67 while
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apple's
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rose 45 the company's venture into
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podcasts
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began in 2015 from the start it invested
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heavily
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then in 2018 it opened its podcasts for
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spotify to creators all over the world
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why open it up well in 2017 apple had a
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55
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market share of podcast content but it
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was only available
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in 20 of devices worldwide so the rest
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of the market is
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up for grabs then they invested heavily
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in purchasing giants
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gimlet and anchor to relevant podcast
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networks for 340 million dollars
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the result well now spotify hosts over 1
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million
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different podcasts more than any other
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software in the world
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users have gone from 131 million in 2017
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to 286 million
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in 2020 and total revenue doubled but
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spotify came in very late to the podcast
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game which had always been
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under apple's control so what was the
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difference according to a neiman lab
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there are critical differences between
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the two spotify users leaned more
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towards entertainment while apple
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podcast users
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focused more on news then there's
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availability with over 1 million
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podcasts
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and advanced ai the chances of finding
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other podcasts
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interesting are higher with spotify
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while with apple it's harder for lesser
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known podcasts to appear
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in the featured section and then there's
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integration with spotify
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both podcasts and songs are available
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within the same app
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rather than having two separate apps x
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obsession for
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seamless integrated high quality
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listening pays
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off add to that the latest ai and data
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analysis
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and spotify has a winning combination
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the future spotify isn't home free
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especially when it comes to money the
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famous free to paid
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user turn is still a challenge they did
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see profit in 2019 but projections
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indicated it wouldn't last
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and it didn't in 2020 so many
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advertisers withdrew that it failed to
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meet revenue expectations
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and this was a company that didn't rely
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entirely on ads
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their average revenue per user also
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declined nine percent
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year in year some experts consider this
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decline is due to the company's
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expansion to markets in which
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it charges less per month but they also
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warn
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that ad revenue will be critical for
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spotify as they focus on podcasts which
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are free for all users
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ads become a big part of the business
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then there's the technological side to
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it yes
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spotify is at the forefront of ai and
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user experience
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but competition is getting stiffer all
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those big names are trying to catch up
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but spotify has an ace up its leave yes
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they dominated music
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now they're going after the video market
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both free and paid users will now be
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able to watch videos from select podcast
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creators
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contrary to youtube in which only paid
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subscribers can enjoy such content
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for users it means more content for
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creators more options
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for the competition it's yet another
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challenge for now spotify knows us
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too well and that's bad but perhaps they
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have a song to make us feel better
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so what is your favorite app and where
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do you listen to your music and your
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podcasts
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we might be launching a podcast soon so
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we want to know
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let us know in the comments and don't
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forget to hit that subscribe button
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see you next week
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you
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