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All Of It with Alison Stewart
How Spotify Came to Dominate the Music Industry
00:19:36
Journalist Liz Pelly discusses the reporting from her book, Mood Machine: The Rise of Spotify and the Costs of the Perfect Playlist.
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WNYC Studios
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Alison Stewart
This is all of it on WNYC. I'm Alison Stewart. Spotify was founded nearly 20 years ago at a time when the music industry was only just figuring out how to survive in a digital landscape where piracy was rampant. Spotify offered a solution and a new order, a way to use that technology to make music widely available without giving it all away for free. The question though, would become what? Where was that money going? And what would this new system prioritize? My next guest is journalist Liz Pelley, the author of the new book Mood the Rise of Spotify and the Costs of a Perfect Playlist. In her book, she describes Spotify in those early years, how it managed to cut deals with major labels and become the premier streaming platform, and then how it grew from there, investing in playlists driven by algorithms that prioritize streaming numbers over anything else. Liz Pelley will be in conversation with WNYC's own John Shaffer at the New York public library on March 11, and she joins me now. Welcome, Liz.
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Liz Pelly
Hi Alison. Thank you for having me.
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Alison Stewart
Hey listeners, you want to get in on this conversation? How do you listen to your music? Do you use Spotify or something else? Do you feel like Spotify has changed your music taste? Our number is 212-433-WNYC 212-433-9692. Or, if you are a musician, how has streaming affected the work you you do? 212-433-969-2212-4433 wnyc we're especially interested in hearing from musicians who have ghostwritten for Spotify playlists. The birth of Spotify. Let's start there. You describe Spotify's emergence out of the early 2000s scene. It was a scene full of, well, piracy was the way you put it. Why is piracy a good place to understand the emergence of Spotify?
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Liz Pelly
That's a great question. Something that is really interesting. In researching this book, I went back and I was looking at the way in which various early Spotify employees were talking about the company, and the way in which the company was thinking about its value or its pitch to the music business at the time. And something that often comes up in tracing this history is how in its early days, Spotify wasn't necessarily looking to create something that was an alternative to piracy, but they were positioning themselves as offering something better than piracy. You know, it was a time in which music listeners had become really used to this experience of going to their computers, opening up their computers and being able to access, like any song they could possibly imagine. And Spotify in particular was founded in Sweden, so a country where music piracy wasn't only super rampant, but also took on this kind of political dimension in a way that was a little bit different. There was a pirate party in Sweden and it was sort of discussed just in a different way. The music industry was particularly willing to try out licensing music to something like Spotify, which had a free tier, which is super unusual. At that time. The music industry was like super averse to any type of startup or app that was positioning itself as free music. But in Stockholm or in Sweden in particular, they were a little bit like more willing to try out licensing their music to a platform like this because they'd sort of given up on the idea that people in Sweden were going to pay for music, according to people who were there at the time.
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John Shaffer
Curious. Spotify actually wasn't necessarily a music forward business initially. When did that actually happen?
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Liz Pelly
Yeah, it's really interesting, you know, like going back and listening to some of these interviews with executives from the early history of the company. You know, there's one interview with the co founder, Martin Lawrence, and who founded Spotify with Daniel Ek in 2006, and he's talking about how, you know, their backgrounds were in advertising. They were coming from the world of ad tech. And the initial idea for Spotify was a way to provide access to this large catalog of music for free, supported by ads. And if you listen to, you know, Martin Lawrence and talk about at the time, he'll say, you know, we knew the business model was going to be advertising because that's where our experience was. But in terms of the traffic source, you know, we thought maybe it'd be music, maybe it'd be video, maybe it would be product search and reporting on the company. I really got stuck on this phrase of like traffic source, because I think it kind of reveals how they were thinking about music at the time, which was really, you know, as a traffic source for an advertising product. And as one of my interviewees says in the book, you know, yeah, when you start looking at Spotify through this lens of its beginnings as an advertising company or an advertising product, I think a lot of things about the way in which it has impacted music and culture start making a little bit more sense.
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John Shaffer
Spotify was not the only streaming platform in those early days. There were other apps, there were people creating playlists. How did it become the biggest?
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Liz Pelly
Yeah, that's a really good question. So, you know, obviously there's the whole history of the company in Sweden that I just mentioned, but then in the United States in particular, you know, so Spotify launched in Sweden and some other parts of Europe in 2008, and then it launched in the United States in 2011. And when the company launched in the United States, there was a lot more competition. Like you mentioned, there was Rhapsody, which is an earlier streaming service. There's. There were these other streaming apps and they had to figure out how to differentiate themselves. So one of the ways in which they did that was, you know, towards the end of 2012, early 2013, they started investing more into playlists and sort of not just positioning themselves as a way to access all of the music in the world, but as a service that was really more for, like, providing the perfect soundtrack to every mood and moment, or, you know, knowing music tastes better than, you know, yourself. That kind of became, like, the way in which it was positioning its product offering in, you know, 2013, 2014.
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John Shaffer
Let's take a call. This is Jamie calling in from Hastings on Hudson. Jamie, thanks for calling all of it. You're on the air.
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Jamie
Wow. Thanks so much for having me, guys. I. I'm just really excited that this topic is being covered because music ownership has been just destroyed over the past generation. And I also came from advertising, so I know exactly what the advertising model has done to it. So between myself, I founded Mark BJ with the world's oldest NFT patent, and I teamed up with Keith Shockley to launch it. We're really in a place now where remixing is the standard. Everybody's not using just instruments, but samples, so there's IP everywhere, and it's really complicated. So we're really focused on making sure that everybody is rewarded for their royalties, that they're deserved, and that everybody who owns music is able to sell it onto others. Think of it like affiliate fees, but it means that ownership stays with the people who buy the music, including the split of the samples. You can own that yourself, too.
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Alison Stewart
Jamie, thanks for calling in. I'm speaking with author Liz Pelly about her book Mood Machine, the Rise of Spotify, and the cost of the perfect playlist. We're taking your calls if you're a listener or an artist. How has Spotify and streaming in general affected the way you enter interact with music? If you're a Musician who's written music for Spotify playlist. We want to hear from you too. 2124-3396-9221-2433. WNYC. You can text to us or call in at that number. Spotify began to make playlists an integral part of its model around 2012. Why did that move become consequential?
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Liz Pelly
Yeah, so you know, 2013, 2014, 2013, Spotify bought this Swedish company called Tunago, that was a company that was making ready made playlists, as they referred to it. And around that time the front page of Spotify started to look a lot different. You would see things like your favorite coffee shop or like Indy Chill or today's top hits. And these playlists started having sort of outsized impact on the music business. When I started writing about streaming in 2008, it was an era in which these playlists had this unique weight in the music industry. And something that's really interesting to me is that in the early days these platforms were really pitched as, you know, platforms that were going to democratize the music business. And it was pitched to the independent music world this way that these playlists were going to level the playing field and that the gatekeeper power held traditionally by major record labels and by commercial radio stations was going to be diminished. But I feel like something that we've seen in the music industry since the rise of streaming has been, you know, the rise of new types of gatekeepers and the ways in which these playlists were sort of kind of like having this outsized influence on musicians careers and their abilities to meaningfully connect with listeners in the streaming era was, you know, just among one of the first consequences that started revealing itself now. You know, something else that I unpack in the book is sort of the ways in which as streaming curation has evolved, a lot of kind of music recommendation has started revolving a lot more around moods and vibes than necessarily around artists and albums. And just kind of thinking more broadly about the impact of that on music listening and you know, how it maybe is contributing to sort of like a more sense of passivity. I mean, streaming didn't invent the passive listener or the back listeners. The music industry refers to it, but it certainly has sort of championed this way of thinking about music.
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John Shaffer
There are two parts to that answer. I want to, I want to divide first. I want to talk about the major labels and the independent labels that you mentioned. How did their entrance, their interests differ in reference to what Spotify offered?
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Liz Pelly
Yeah, no, that's a great question. And I think that's something that is important to remember is that the entire existence of the streaming model as we've come to know it, like the idea of having a product where you can search any song you could possibly imagine, I mean, people who are really into music will tell you that these services don't have every song in the world. But you know, most of what you could possibly imagine as a user of any services. Across the history of popular recorded music, that type of model relies on the major labels, Sony, Universal and Warner being down. They have to participate, they have to license their music in order for this model to exist. So that puts them in this sort of like outsized position of they have outsized negotiating power when it comes to like striking deals with these companies. In the early contracts they were able to negotiate things like really big advances, equity in the company. They have certain, like per user minimum rates on the free tier. They have like certain free advertising influence over how the product evolves. So you know, the major labels really just have kind of like more influence over streaming. And in terms of the material impact on musicians lives. Streaming services Pay. Spotify pays 70% of its revenue to the music business. But lots of research over the years has supported the fact that in the current way in which royalties are paid, which is this pro rata revenue share model, the vast majority of that revenue ends up going to the major labels.
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Alison Stewart
Let's talk to Alden, he's got the second part of my question. Hey Alden, thanks for calling all of it. What's your question?
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Alden
Hi, yeah, so thanks so much for having Liz on Allison and thank you, Liz. I just got the book. I'm so excited to read it. I'm a musician. I studied jazz in college and I actually emailed you with my friend. We were noticing that these jazzy mood playlists like Jazzy Morning and Chill Jazz all had these mashup of old jazz musician names that were like combination names like Ornette Haynes was the most egregious one, like Ornette Coleman meets Roy Haynes, two very famous jazz musicians. And Ornette Haynes had about four times the monthly listeners as Ornette Coleman. And it was like background AI seeming piano jazz. And that seemed to be kind of across the board these names that were just like derived from old real artists getting like way more play out of Spotify than the actual artists themselves. I was wondering if any more. If you got any more information on that practice at Spotify.
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Liz Pelly
No, that's such an interesting question and such an interesting point because There is this part of this book where I really focused on investigating the way in which, like what I refer to as ghost artists, so essentially like composers, musicians hired to make stock music to fill out these more background listening playlists. But really impacting instrumental traditions like jazz and classical, ambient and lo fi, hip hop, beat making, et cetera, has become this practice at Spotify and in the streaming era more broadly. But there's so many different ways in which other sort of schemes like this play out. Like hearing you talk, I'm just thinking like, oh, you know, it sounds like someone who's trying to take advantage of kind of like SEO or like the things that someone might go for on a streaming service and figure out how to kind of catch those listeners with some AI generated music. So yeah, there's certainly like a lot of concerns there in terms of the impact on musicians.
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Alison Stewart
You know, some people might say, well, ghost writing, well, that's already a thing. And there are ghost writers in books, there's ghost writers in music, there's producers in music who you never hear from. How is this different?
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Liz Pelly
Yeah, absolutely. And you know, something I tried to do is I interviewed a handful of musicians from my book who are musicians who work for some of these companies that have these specific types of relationships with streaming to talk to them about it. Because it's true that this has been sort of like, you know, a kind of day job that a lot of musicians had or like a side hustle that a lot of musicians have had for a long time is like making what is called production music. Like, you know, in some cases royalty free stock music that might be used in like an advertisement or a commercial or, you know, sometimes it's called library music. And at least in this case, you know, something that was really interesting was a lot of the musicians that I talked to were making this sort of music and they didn't have. There's so much like confusion and ways in which they were sort of alienated from like the reality of like how the music then traveled through Spotify. Because there's so much like secrecy around the way in which these playlists get curated that they were actually like making music for companies that had these sort of very secretive deals with streaming services that they didn't even really know anything about. So I would say that's one big difference with the way in which this kind of like ghost artist phenomenon has played out in the streaming era. There's a lot of mysteriousness.
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John Shaffer
You know, part of Spotify becoming part of our lives is this Spotify Annual wrap series that starts, but it requires Spotify to collect data on listeners. What kind of data is Spotify collecting that listeners may not know about? And what does Spotify do with that data besides creating these annual Spotify wrapped?
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Liz Pelly
That's a great question. You know, something that I have been saying is, you know, this is a book that's about music, but it's also a book that's about surveillance and labor and politics. And there's, you know, in terms of data collection, there's so much, so much data that gets collected on listeners on streaming services, not just Spotify. But yeah, in terms of Spotify data collection, it's basically every move that you make on the platform. Like an employee told me in my reporting, you should be under the assumption that everything you click on the platform is being recorded. So every track you listen to, how you found that track when you hit play, when you hit skip, every playlist, you make the playlist titles, the playlist descriptions, all of that data is being recorded. And there's different, different things that they do with the data and different ways in which it's useful. You know, like something that you'll hear is like, oh yeah, you know, like this data is collected, but it's just to give you like more accurate recommendations. But it also is used. You know, this is. There's a component of this company, part of its business model is advertising. So a lot of this data is used to sort of like strengthen its advertising product. And then also the data is also, you know, becomes its own commodity in and of itself. You know, whether it be through different partnerships that streaming services have with other companies where they share data or in my reporting, I've like over the years dug into this direct relationship that Spotify has with this marketing company called WPP where they offer like mood data. And there are these questions where it's like, well, what are companies actually able to do with mood data? Is it actually a privacy violation? Does it actually reveal anything about you? And, and one of the parts of the reporting process that was the most interesting to me was interviewing this GDPR lawyer, like the General Data Protection Framework in the eu who said, you know, if you're even having these questions where like you don't know what data is being collected on you, you don't know what they're capable of doing with that data, that means that your privacy has been violated.
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John Shaffer
Yeah. This text says Spotify is an abomination for musicians who are in jazz and other non pop genres. They pay.003 cents per spin which means you can earn a whopping 3 cent cents for 100 spins or $3 for a thousand spins. It is criminal. You can read about that in the book Mood Machine, the Rise of Spotify and the Costs of the Perfect Playlist. It is by Liz Pelly. Liz, thank you so much for giving us an introduction to your book.
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Liz Pelly
Thank you so much for having me. A roll that feels like paradise and always at a heavenly proud Angel Soft angel soft Soft and strong.
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Alison Stewart
So it's simple.
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Liz Pelly
Pick up a pack today. Angelsoft Soft and strong.
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Alison Stewart
So cool.
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