The grant, awarded to Spotify on March 1st, states that Spotify has created a “system and method for breaking artist prediction in a media content environment.” In other words, Spotify has developed software to help them predict the next up-and-coming artists. Industry professionals have been quick to point that it is basically software that could replace A&Rs.

Spotify’s software works by assigning listeners who stream new content as “early adopters” and then analyzes their listening patterns to help them come up with accurate predictions. The patent states that the data is collected without the member’s knowledge, saying that early adopters “need not have any knowledge that they are an early adopter, as the media server responds by streaming the requested media content, as it responds to all users.”

The patent authors go on to explain that an artist can be deemed “breaking” if “the popularity of the artist exceeds a minimum playback threshold while having experienced growth in popularity that exceeds a minimum growth threshold.”

The filings are part of the Copyright Act, which requires a copyright royalty judge to conduct hearings to decide mechanical royalty rates streaming services must pay artists every five years. A mechanical royalty is a payout that an artist receives whenever a copy of their song is made. According to online platform Royalty Exchange, current mechanical royalty rates on streaming services are about $0.06 per 100 on-demand streams.

David Israelite, president of the National Music Publishers Association (NMPA), has called the current proceedings “the most important CRB trial we’ve ever had.”

Contents of the filings have yet to be made public. In a statement to Music Business Insider, however, Israelite said that “Amazon, Spotify, Apple, Pandora and Google have proposed the lowest royalty rates in history.”

These current proceedings are part of a larger battle fought between songwriters and streaming services. In January 2018, a CRB hearing awarded songwriters the largest royalty rate increase seen in the CRB’s history. Following the decision’s ratification, Spotify and Amazon appealed the ruling in what the NMPA called a “shameful move” that equates to “suing songwriters.”

In 2020, the U.K.’s Digital, Culture, Media, and Sport Committee launched an investigation into streaming’s impact on artists. The probe’s findings caused musician’s rights organization Union of Musicians and Allied Workers to launch a campaign against Spotify’s practices.

While the price is not yet known, CNET reports that the upgrade will be “priced competitively with other high-quality-audio streaming tiers,” speculating that it will likely be an additional $10 a month on top of the basic Spotify subscription cost. Spotify HiFi was announced during Spotify’s recent Stream On live stream event.

On an informational page dedicated to the upgrade, Spotify shared that they’ve been working with speaker manufacturers to ensure that HiFi will be available on many devices through the use of their cloud-based Spotify Connect. “Ubiquity is at the core of everything we do at Spotify, and we’re working with some of the world’s biggest speaker manufacturers to make Spotify HiFi accessible to as many fans as possible through Spotify Connect,” it reads.

Spotify HiFi is set to launch to “select markets” sometime in 2021. At the time of writing, neither a specific release date nor information as to what countries will have access are known.

In 2020, Spotify lost an amount to the tune of $2.2 million per day, according to Music Business Worldwide. While billions of tracks are streamed on the platform daily, the company spent over $1 billion on sales and marketing in 2020, leading to the significant losses it suffered. Although Spotify closed out 2020 on a positive note, with 155 million paying subscribers recorded in Q4 (an increase of 11 million over Q3), operating losses came in at over four times the amount that the platform lost in 2019.

Total operating losses totaled $810 million. Net losses were slightly less grisly after a tax bump of roughly $153 million, though, and while the company did not turn a profit last year, Spotify’s share price tripled. Shareholders may face the bittersweet decision of either pulling out or seeing things through until the company can turn a profit.

Despite the major losses, Spotify CEO and co-founder Daniel Ek remains determined to put the platform’s growth ahead of profit for the time being.

“We’re in the growth stage, trying to capture that growth,” Ek told CNBC last year. Eventually we will get to more of a point of maturity where we’ll focus more on profit over growth, but for the next few years it’s going to be predominantly growth for us.”

The placements will apply to two features: Spotify Radio and Autoplay. The former allows listeners to start a station based on a song or artist, and the latter automatically plays a track similar to whatever just ended.

As with previous songs appearing in Radio and Autoplay, tracks will be placed based on an algorithm that factors in time of day, other music in users’ playlists, and similar users’ preferences, among other things. Because of that, however, Spotify does not promise a certain amount of exposure for any given track.

“If the songs resonate with listeners, we’ll keep trying them in similar sessions,” reads a blog post on the Spotify website. “If the songs don’t perform well, they’ll quickly be pulled back. Listener satisfaction is our priority—we won’t guarantee placement to labels or artists, and we only ever recommend music we think listeners will want to hear.”

The announcement comes at a time when Spotify is under fire for the very royalty rates it proposes to reduce.

The company’s billionaire CEO, Daniel Ek, remarked in an August interview that “You can’t record every three to four years and think that’s going to be enough” to support oneself as a musician, prompting the launch of a Change.org petition calling for the company to pay out ¢1 per stream. The U.K. government has since launched an investigation into the impact of music streaming on the music industry, and the Union of Musicians and Allied Workers has started an initiative called “Justice At Spotify” to demand increased royalties.

Spotify has said that after testing the new feature on Radio and Autoplay, they may incorporate it into other parts of the platform.

Image credit: Sara Kurfeß

“Spotify is the most dominant platform on the music streaming market,” reads verbiage on the Justice At Spotify website. “The company behind the streaming platform continues to accrue value, yet music workers everywhere see little more than pennies in compensation for the work they make.”

“With the entire live music ecosystem in jeopardy due to the coronavirus pandemic, music workers are more reliant on streaming income than ever,” it goes on. “We are calling on Spotify to deliver increased royalty payments, transparency in their practices, and to stop fighting artists.”

Spotify’s market valuation reached $50 billion in June, and UMAW argue that artist payouts have not grown proportionately. A feature of the campaign is the slogan “Penny Per Stream Please,” which echoes the demand of a recent Change.org petition.

At the time of writing, over 10,000 musicians have cast their support for “Justice At Spotify.” The full list is available on the UMAW website.

The Committee will investigate streaming platforms like Spotify, Apple Music, Amazon Music and Google Play. They note that revenue generated by the industry exceeded £1 billion from 114 billion streams in 2019, but artist payouts can be as low as 13% of the total income for on-demand music listening services.

“While streaming is a growing and important part of the music industry contributing billions to global wealth, its success cannot come at the expense of talented and lesser-known artists,” said DCMS Committee Chair Julian Knight MP.

“Algorithms might benefit platforms in maximizing income from streaming but they are a blunt tool to operate in a creative industry with emerging talent risking failing the first hurdle,” he went on. “We’re asking whether the business models used by major streaming platforms are fair to the writers and performers who provide the material. Longer-term we’re looking at whether the economics of streaming could in future limit the range of artists and music that we’re all able to enjoy today.”

The DCMS, a cross-party group of MPs, will also try to determine whether lawmakers should take action to protect musicians and labels from piracy in light of EU decisions that have affected intellectual property rights.

The announcement comes after a Change.org petition for streaming services to raise their stream payout to 1¢ amassed over 75,000 signatures. The description notes that Spotify CEO Daniel Ek, a billionaire, remarked in an interview that “You can’t record every three to four years and think that’s going to be enough” to support oneself as a musician, despite it typically costing thousands of dollars to record and promote music.

The DCMS are looking for input from artists, record labels and industry experts whom they encourage to submit evidence via the U.K. parliamentary website.

Image credit: Sara Kurfeß

Music Business Worldwide (MBW) reports that the company sent out a memo to that effect on May 21st. It detailed their “phased approach” to reopening offices, giving individual employees “full discretion” on whether or not to come to the offices before 2021. As of last year, Spotify employed 4,405 people per their 2019 fiscal report.

“Earlier today, we announced the extension of our work-from-home arrangement for all Spotify employees globally,” a spokesperson later confirmed. “We will continue to track local government guidelines city-by-city and take a phased approach of opening our offices when we deem it safe to do so. Our employees’ health and safety is our top priority. No employee will be required to come into the office and can choose to work from home through the end of the year.”

Despite suffering a financial blow in the early months of the COVID-19 pandemic, Spotify stock has soared to its highest price in nearly two years following the signing of an exclusive licensing agreement with The Joe Rogan Experience.

“We do not and have never created ‘fake’ artists and put them on Spotify playlists,” read the spokesperson’s email to Billboard. “Categorically untrue, full stop.”

While not directly refuting accusations that the company had created fake artists, the spokesperson said that Spotify paid royalties on all of its songs, including those on playlists. “We do not own rights, we’re not a label, all our music is licensed from rightsholders and we pay them,” the email continued. We don’t pay ourselves.”

Spotify remained silent last year when the original claims surfaced in a Music Business Worldwide article. Only when The Vulture cited the now dated piece in their own feature – of which the fake artist speculations only served as a supporting detail – did the streaming service’s management elect to get in front of the issue. Music Business Worldwide promptly returned fire with a list of artists whose music is only featured on Spotify and nowhere else.

In Search of Solvency

Even though Spotify’s “freemium” business model positioned it better than platforms like SoundCloud, its break even point remains no closer on the horizon. From 2014-2016 the former company’s losses grew by 64% to $340 million. Even as their team finds new ways to capitalize on the service, in the the long term its fate remains dubious.

SoundCloud also finds itself mired in recent controversy as the company just announced that it would cut 40% of its staff.

Source: Your EDM

Label owners and other content creators would pay for their singles to be included in playlists users follow where previously advertisers could only promote via banners. Listeners would be able to opt out of hearing sponsored music, although at present it’s not clear whether or not Spotify users at the free level would be afforded the courtesy.

The proliferation of music streaming services in the mobile era has spelled trouble for the recording industry, which already suffered a decline following the advent of music downloads. Streaming apps themselves haven’t had an easy time operating sustainably, but Spotify had better luck than most. Since its 2008 launch, the company’s “freemium” model drew a wide user base to the service while simultaneously incentivizing paid subscription.

Recently, however, Spotify’s profitability has become uncertain. The company’s acquisition of SoundCloud fell through after months of deliberation, and between 2014 and 2016 its net losses increased from $207 million to $340 million – a 64% margin.

Spotify has not revealed when it will roll out the sponsored song ad unit or disclosed pricing details at this time.

Source: Dancing Astronaut