Spotify has said that Apple is a “gatekeeper” and that it’s “pretty nuts” that Apple rules mean Spotify couldn’t do various things - like selling digital “superfan” content.
In a blog post laden with pot shots at Apple, the company says that the EU’s Digital Markets Act means that things will change for users in Europe in the near future. These changes will include possible “superfan apps”. But what does this actually mean, and what are the consequences for the music industry - and for Spotify?
“What is one of the top complaints about Spotify?” muses the streaming company in its latest blog post discussing the changes. Where to start? The platform’s recent move to demonetise millions of tracks, demanding 1000 streams from at least 500 unique users before artists and labels get paid for the company’s use of their music, would be pretty high on the list of many creators.
Talk to a distributor and they might say that top of their list of complaints about Spotify is the streaming platform’s new rules that will see distributors fined £10 each time that Spotify decides a track they have delivered has been subject to streaming fraud or stream manipulation - something that a distributor has little or no direct control over once a track is live on the platform.
A key part of that complaint from distributors is that Spotify won’t say in writing how it will decide this, only offering verbal and non-binding assurances that any stream manipulation would need to be “egregious”. Distributors might also highlight the lack of any detail on how they might appeal those fines.
If you talk to one of the 1500 people suddenly laid off by Spotify just weeks before Christmas they might say that Spotify’s ill-fated splurge on podcasts, which caused financial issues for the company and ultimately led to them losing their jobs.
And if you ask people at some of the major labels, they might say their top complaint is that Spotify has not been fast enough to shift revenue allocation to favour major label content.
None of those are the top complaint against Spotify though. Not according to Spotify, at least.
Using the EU’s new Digital Markets Act as an opportunity to take a series of swipes at Apple, Spotify says that - in fact - the top complaint is that you just can’t buy enough things using Spotify.
Don’t worry though, the Digital Markets Act “unleashes huge opportunities” for Spotify to address this.
“Consumers have asked us for years about the dead ends, lack of information and endless hoops to jump through just to purchase a subscription or audiobook”, continues the hapless content marketer tasked with churning out a ‘fun spin’ on the announcement. “For years, even in our own app, Apple had these rules where we couldn’t tell you about offers, how much something costs, or even where to buy it. We know, pretty nuts”.
What the latest ‘gloves-off’ changes mean for consumers is an unrivalled opportunity for Spotify to spam every Spotify user in the EU with a constant barrage of notifications.
These will include “direct communications in the Spotify app about subscription offerings, upgrades, product prices, deals, and promotions. We’ll soon be able to give you information in the Spotify app about prices for things like Premium subscriptions and audiobooks. And we will be able to communicate clearly with you in the Spotify app about new products for sale, promotional campaigns, superfan clubs, and upcoming events, including when items like audiobooks are going on sale”.
Suck it, Apple!
Of course, no one disputes that artists, labels and managers would welcome the ability to offer more in the way of D2C or “superfan” content - and opportunities to transact - inside Spotify. However, it’s not that Spotify has been unable to offer this up to now - it’s simply that it has been unable to offer paid digital superfan content that would generate revenue for artists and labels while also generating revenue for Spotify.
This is because the commission it might take would be eaten up by Apple’s commission for in-app payments for digital products - and that commission would be double the 15% commission taken by Bandcamp, a leader in the digital D2C space. Though, it’s important to note that Bandcamp - until the DMA was introduced - was also unable to sell digital content through its app without paying commissions to Apple.
In a brief nod to the artists, songwriters and labels that provide the content that powers the vast majority of Spotify’s revenues, the announcement says that the “easier experience” that constantly having to swipe away notifications from Spotify offers consumers also offers “good things for artists, authors, and creators looking to build their audiences” - presumably in the form of pay-to-play opportunities to add to that ceaseless stream of pop-ups, alongside the ability to transact in app.
But that’s not all! The “freedom from gatekeepers” - something Spotify is apparently not, but Apple, it would like you to know, definitely is - will bring all sorts of other benefits.
One of those benefits - and brace yourself, because it’s pretty revolutionary - will be the ability to download the Spotify app directly from the Spotify website. Amazing!
Once you’ve picked yourself up from the floor, it’s probably also worth knowing that - because Lucian Grainge has declared 2024 the year of the superfan - Spotify will also be able to offer “superfan clubs”. These superfan clubs are likely to include paywalled “premium audio content” allowing artists to lock content and make it available to people only if they pay. What Spotify has not said is whether its commission on “superfan app” payments will follow its current 30% cut of revenues - or whether it’ll offer a commission more in line with Bandcamp’s 15%.
Of course, one of the original USPs of Spotify was its great user experience, making it easy to find and play the music you wanted to listen to as quickly as possible. Over time that has - by necessity, the company might argue - changed as Spotify tries to find a sustainable business model. That has seen the music streaming platform evolve into an “everything audio” platform, investing heavily in podcasts and more recently audiobooks.
While the opportunity of superfan clubs is potentially great news for artists, it potentially degrades the user experience - not just on Spotify but on other streaming platforms too.
That said, the opportunity around in-app transactions and gated content possibly offers greater upside for podcasters and audiobook publishers by offering an easier and more direct route to monetisation - and Spotify a way to generate commissions from that monetisation. These additional revenue streams that are not tied to music are something that Spotify desperately needs to be able to do in order to generate sustainable revenues and reach a point where it doesn’t continue to lose money each year.
From a music point of view it will be interesting to see how this develops. Combined with - presumably - pay-to-play push notifications to alert potential superfans to the existence of superfan clubs and locked content, it’s almost certain that this announcement will further exacerbate the ‘two tier’ split between ‘professional artists’ and ‘anything else’ which is being pushed by Universal Music and Warner Music.
With major labels perhaps better equipped to assign marketing spend to in-app notifications to drive consumers towards premium-gated content, we potentially go back to a fragmented music consumption experience where you can’t get all of the music on all of the platforms, and the good stuff is only available on one platform, or a very limited number of platforms.
It also means - if the move by Spotify into “superfan” and D2C transactions is followed by other digital service providers - then managers and labels potentially have to manage multiple “superfan” stores across different platforms.
That aside, the move to enhanced superfan opportunities could be great news for Spotify - and its closest major label partners.
What the impacts are for the rest of the industry, only time will tell.
