How Spotify Wrapped its hands around the music industry, and us

CLIP You’re listening to a frequency podcast network production in association with City News.

Jordan Heath Rawlings When my Spotify wrapped arrived this year, I was excited, perhaps embarrassingly so And why is that? Well, it’s because this year is the first one since my child was born that my Spotify account has been separate from the family account. Now, if you use Spotify or you use any streaming service and you have children, you know what this means? It means that finally the algorithm is analyzing me and me alone. No more songs about cats or having my number one song for a third straight year be Call Me. Maybe finally, this behemoth of a streaming service would use all of its AI power to stare directly into just my musical soul and tell me who I really am now. Am I aware that this is a marketing tool? Do I understand that Spotify’s business model is fundamentally altering what it means to be a musician today? Do I wonder how people like myself and probably many of you, can continue to obsessively use this service while also claiming to love and cherish the artists that struggle to make a living because of it? Will I share my Spotify wrapped top artist with you at the end of this interview? Yes, to all of those questions. I’m Jordan Heath-Rawlings. This is the big story. Kelsey McKinney is a writer, a reporter, and a podcaster. The podcast you may have heard of it is called Normal Gossip. The Writing and Reporting is mostly done at Defector where she wrote about the phenomenon, I guess that is Spotify wrapped Kelsey.

Kelsey McKinney: Yeah, you could call it a phenomenon. I mean, it’s everywhere. So we’re forced to look at it.

Jordan: Well, just for those people who might have been living under a rock or stubbornly refuse, and I respect them for this to join the streaming revolution, just sum up what Spotify rap is.

Kelsey McKinney: Sure, yeah. I mean, I envy anyone who is living under the kind of rock where you do not have to confront Spotify rap. It seems like a peaceful and nice life. So if you listen to music and podcasts and now audio books on Spotify with any consistency at all, at the end of the year, the company puts out a kind of very stylized marketing package where they have used artificial intelligence to create little graphics that tell you what you spent your year listening to. So those are things like who your top artists are, what your top songs were, what kind of genres you like and genres you don’t like. And then every year they add little fluffy special things. Like this year their big shareable graphic was which city in the United States has the same listening preferences as you?

Jordan: What’s yours?

Kelsey McKinney: Mine was Burlington, Vermont, along with I think everyone who listened to Boys Genius. Oh, there you go. So a good proportion of us,

Jordan: Mine was, and I asked people at the beginning of this to guess my artist, but I’ll reveal at the very end. Mine was Missoula, USA. I don’t know if that gives anybody a hint or not, but I think it’s pretty unique.

Kelsey McKinney: Wow, I can’t wait to hear who that artist is. I haven’t heard anyone who got Missoula, so congratulations. I’m being special.

Jordan: There we go. But that’s what this is about. That’s what the concept behind Spotify rap is, right? It can either be really affirming or really embarrassing or really unique.

Kelsey McKinney: Totally. The graphics themselves are made to share. They’re very easy to export. You can add them to your Instagram story. They’re already sized correctly for you to do free marketing for Spotify. But I think part of the joy of Spotify wrapped and what they’re capitalizing on is the fact that people like to share the culture that they like, right? You want to know what your friends are listening to.

Jordan: Just how popular is this thing? And you touched on it a minute ago, but what does it do for Spotify? Why is it so important to them? Not to us.

Kelsey McKinney: I think it’s so important to Spotify because it creates a round of, if not positive, neutral press for Spotify, I would say it is probably positive in that people are sharing these graphics, and one of the most powerful forms of marketing is creating fear of missing out in other people. So if you use, for example, apple Music, which is another perfectly normal streaming platform to use, you don’t get the shiny special marketing graphics that Spotify made for all of its listeners on the same day where they’re all talking about it. And so they create a kind of atmosphere where if you don’t use Spotify, you start questioning if you should. Maybe that’s how I should be listening to music, if that’s what all of my friends are talking about.

Jordan: I really liked your piece at Defector, and I want to talk about your theory. I guess it’s a theory on why we love these things so much, and obviously Spotify wrapped is at the very top of the list, but it’s funny to notice some of the copycats we’ve seen. I mean, I think I’m going to get sometime in the next few weeks, something from Uber telling me what restaurants nearby I’ve patronized the most and that kind of stuff. What is it within us that is so attracted to these kind of summaries, even though they can reveal maybe things that we’re not so proud of?

Kelsey McKinney: We see these happening from every single app now, right? Because it’s been so popular for Spotify. You’re seeing it with Uber Eats, you’re seeing it with GrubHub. They did one for even BeReal last year, which is a kind of silly thing to get a wrapped of

Jordan: What is BeReal.

Kelsey McKinney: It’s an app where you take a photo every day at the same time as everyone else,

Jordan: And so you get a wrap. That’s your photo at the same time.

Kelsey McKinney: Yeah, exactly. But I think that we like those things because the end of the year is culturally a time when we’re doing a lot of retrospective work. What happened this year that I’m proud of what happened this year that I’m not proud of? Who am I? And so at a kind of meta level, I think that Spotify wrapped and all of these wraps function as a kind of mirror where these apps that we use every day are telling us, here’s who we think you are. And so seeing that can be really affirming in the same way that seeing a picture where you think that you look good can be really affirming, or it can be really aff affirming and upsetting to see that Spotify thinks that you only listen to the wheels on the bus go round and round because you have a three-year-old,

Jordan: Right? I actually, we have the Spotify family now, which we didn’t have before. So this is in fact the first year that my own Spotify wrapped is not inundated with kids music. Yeah.

Kelsey McKinney: Wow. I’m really happy for you. So

Jordan: Taylor’s not in my top five for the first time in like five years. Sorry, T,

Kelsey McKinney: But she is in your family top five. Oh,

Jordan: Yeah. No question. I mean, she’s in everybody’s top five. Listen, Spotify is a business rap is free marketing for them. As you mentioned, it’s important because it’s at least neutral, if not positive marketing. And while we are all busy staring at our own musical reflections, how is Spotify making money and how is their business model continuing to evolve?

Kelsey McKinney: Yeah, so streaming companies like Spotify have really complicated business models. Spotify makes all of their money almost off of people’s subscription fees. So you pay a monthly subscription fee to get ad-free, or you don’t pay a subscription money, and Spotify makes money off of the ads that they’re selling for these services. So all of that money is coming from people, individuals listening to music. And it’s important to note that Spotify is not a company that is really making anything with the exception of Spotify wrapped and some playlists. Spotify is a company that is a distributor more than anything. In the same way that Barnes and Noble is a distributor of books or version, Megastore used to be a distributor of records. They don’t make anything. They’re not a label, they’re not artists. They have tried in several different ways to become those things. And as we’re seeing as the year ends, they’re laying off people on those teams left. And so they’ve failed. And I think that Spotify’s goal is to make you as a consumer, believe that you are supporting artists by using Spotify when in reality you are supporting Spotify.

Jordan: And that’s why if you look at it as a simple cost in cost out model, the more they can charge you for a subscription, the more money they make and less they can pay out to artists per stream, the more money they make. I wasn’t aware that Spotify continually updates and changes the amount it pays out per stream.

Kelsey McKinney: Yeah. So Spotify is kind of a black box in a lot of ways. They don’t really want people to know exactly how much money they’re paying people and exactly why or how and how their algorithm works. So we know for example, that artists who have more listeners who are premium Spotify players get higher royalties per stream, which is a deranged way to run an algorithm to say that because your fans are richer and pay our company more money, you get more money per song play. And that is one thing that they have revealed. They have not revealed basically anything else. And we know based on what artists are reporting and based on what the union of musicians and allied workers has said over and over again that the rate that they are paying per stream is dropping. So in 2018, the average royalty rate was something like $0.01 per stream. That number has dropped significantly in only two years. The expectation is that it will be even less two years from now. So they’re creating a system in which they pay artists less and less for the same product.

Jordan: In your piece, you broke it down in a very straightforward way that people can, I think, identify with in terms of how much you need to listen to your favourite artists on Spotify rap to make them some money. Can you share that with us?

Kelsey McKinney: Sure. Yeah. For most artists on Spotify, you need to listen to a song 300 times for an artist to earn $1.

Jordan: Wow, that’s crazy.

Kelsey McKinney: It is. It’s crazy. And it’s also, I think because we are used to getting music for free now, it’s something that people don’t think about. Like your most played song, if you look at your Spotify raps, it’ll tell you how much you listen to it.

Jordan: Mine was 19 times, so I didn’t even make my favourite artist a Bach.

Kelsey McKinney: Exactly. Yeah. And people who listen to the same song over and over again, usually that number is still under a dollar for the artist, which is you spent a whole day listening to this song and you paid the person who made it a dollar.

Jordan: There’s been a lot of discussion about the future of the music industry and obviously the decline of physical media. And it’s funny that you said we’re used to getting music for free because it feels that way to us, but of course, we’re not getting music for free. We’re getting music by paying Spotify.

Kelsey McKinney: Exactly. And that’s the thing that is, I think scary about the Spotify raft is that it is so beautiful and it’s so easy to share that it is easy to forget that this is a company that artists themselves are saying and have been saying for almost a decade now is destroying their careers.

Jordan: Can we quantify that in any way what it’s done to the music industry over the past decade as we’ve moved from mostly album sales to mostly streams?

Kelsey McKinney: You can, and there are certainly people who have those exact numbers. I don’t have them off the top of my head, but you look at an industry that has drastically swung from a height of CDs where the music industry had never made more money. And you saw a lot of artists just become multimillionaires overnight because people went out and bought, oops, I did it again at Virgin Record Stores for

Jordan: 1899.

Kelsey McKinney: For 1899. Exactly. And now you can listen to, oops, I did it again on Spotify 5,000 times and not pay $18.

Jordan: And I don’t want to sound like this is just picking on Spotify specifically because you mentioned Apple Music and maybe their royalties are a little better. There are other streaming services out there. And also streaming music, while I kind of hate what it’s doing to artists, is a service that solves problems for people. It helps people find new music, it helps them bring music with them without having to tote around obviously a million CDs. But you see the people who are sharing their rap, they have 60, 70,000 minutes of music listened to. These are people that deeply love music and love discovering artists, and they must know that this is a service that is hurting those artists they’re trying to find. And how do we reckon with that?

Kelsey McKinney: Yeah, I think, yeah, you’re absolutely right. I’m making Spotify the bad guy here, but the bad guy is streaming at large. And people who bought into streaming at large very early on are organizations like labels who made choices that put artists in a bad position. And so you’re right that there is not one bad guy here. Like all streaming, even title, which is a service that has the best and most transparent terms for artists at this time is still streaming. You’re still making less than you would’ve made on a cd. And I think as much as I know all of these things can write about them, can speak about them, I use Spotify, I listen to music there, I got my Spotify wrapped, and I enjoyed looking at it. And I think that that is not something that I am proud of. But I think the benefit of streaming has always been that it is infinite. You can listen to anything at any time, and it is beautifully designed and easy to use. You can log onto Spotify and listen to an album that your parents played in 12 seconds, and that is a kind of magical thing to have at your fingertips, and it’s hard to break yourself of that habit once you have access to

Jordan: It. What do you tell yourself?

Kelsey McKinney: What I tell myself is that I support artists in other ways. So my rule is that if I have put an album on repeat at any point, I try to buy it on vinyl because that is a format that the artist gets a good chunk of money from. And I try to see a lot of live music because touring is the way that most bands make their money right now. And so even though that is an imperfect system, it’s the one that I’ve had to allow me to live with myself.

Jordan: If all this is so good for Spotify and so crappy for artists. Why is Spotify the one laying off people at this time of year? How is their actual business model doing?

Kelsey McKinney: I think this is kind of the funniest part about something like Spotify, is that these organizations are not really profitable. They don’t make a ton of money. I mean, they say that they don’t make a ton of money. They’re paying out their CEOs plenty of huge Christmas bonuses, but the reason they’re laying off people is that Spotify is doing something that a lot of new media has done for a decade now, which is try to pivot to whatever they think is going to be the most profitable in the next year. So for a little bit, that was in-House podcasts. They bought up several major, really good podcast companies, like Gimlet is a great example of this, and they brought them in-house. And then two, three years later, they realized that they’re not really making as much money off of Prestige podcasts that never really made all that much money as they had hoped that they would. And so they lay all these people off. So this week they announced that they’re killing Heavyweight, which is a nationally renowned podcast that has won tons of awards

Jordan: And stolen, which has won a Pulitzer Prize.

Kelsey McKinney: Yeah, yeah. It’s kind of mind boggling to watch a company invest so heavily in something and then decide that they don’t want to anymore, basically overnight.

Jordan: And we’ve seen this, I think, with other tech companies who take on new stuff and take on more expenses and hire more people, all with the hope that eventually enough people will flock to the platform to really make it worthwhile and then the bill comes due. So I guess what I’m asking you, I know you don’t know the answer, but what’s next? How do we turn this around?

Kelsey McKinney: Yeah, that is a really complicated question for people much smarter than me. My assumption is that Spotify is a tech company. So we see the same kind of problems with Spotify that we see with a company like Uber. And I think if you’ve read Mike Isaac wrote this great book called Super Pumped about the Foundation of Uber and about how Uber never really made any money, but a bunch of rich people in Silicon Valley thought it would make money, and so they just dumped money into it over time so that it became this behemoth that we basically can’t get rid of. And I think the same is kind of true for Spotify. You have a lot of people who invested a lot of money in this platform and have a lot at stake in it not dying. That is not good. So I’m sure that there’s some legislation that could be done to stop situations like that. I think from a consumer perspective, the best thing that we can do is to make sure that we are sending money directly to the artists that we like, be that through tour sales or merch sales or buying albums physically. And I think being ready to support artists when and if they decide that they’re done with Spotify, I think there is a version of the future in which musicians unionize or go on strike or pull all their music from Spotify. And that’s going to be a really frustrating few months for consumers. And that is where we need to be ready to stand in solidarity with them.

Jordan: And that will be a really interesting time because the other thing that Spotify does, aside from the Wrapped, which is nice and fun and great marketing, is it allows you to curate it, right? Yeah. The way you would normally have curated your giant tower of CDs or whatever. And I look at my Spotify and when I’m listening to it, I’m mostly listening to playlists I have made, and there’s no way to take those with me. So if I decide that I’m making a stand here, I’m standing with the artists, I’m going to Apple Music, or I’m going to title, they have the best deal, those are gone. And that’s something those playlists mean a lot to me.

Kelsey McKinney: Yeah. I think this is one of the hardest things about digital media that I mean activists have been yelling about for a decade now, is that nothing digitally that is hosted on another company’s platform belongs to you. So the most obvious example of this recently is that PlayStation decided that they would stop hosting a few different major streaming companies on their platform. And so anyone who had purchased media, purchased movies, purchased TV shows on PlayStation through those streaming services, lost them. So you purchase something theoretically that you can no longer access, and that no longer belongs to you because the company decided they didn’t want to host it anymore. And I think that that is going to be a real problem in the next decade of people realizing, oh, a lot of these things that I paid good money for to theoretically own were never actually given to me and can just be withheld at random. So yeah, I think you should back up your playlists.

Jordan: Excellent. Kelsey, this has been so much fun and really informative. What’s your number one on your Spotify rap? Is it Boy Genius?

Kelsey McKinney: Oh my God. No. It wasn’t boy genius. It was this band, MJ Linderman, who I really like.

Jordan: I will check them out.

Kelsey McKinney: Thank you. Who got you? Missoula,

Jordan: Jason Isbell and the 400 Unit.

Kelsey McKinney: Interesting.

Jordan: I am a white male who used to be a sports writer. It’s so on brand that I can’t even argue with it.

Kelsey McKinney: Yeah, sometimes a mirror is a mirror.

Jordan: There you go. And fair enough. And also speaking of supporting artists, the only artist I went to see live this year, so I did

Kelsey McKinney: My bit. See you did it.

Jordan: Kelsey, thanks again.

Kelsey McKinney: Yeah, thanks so much for having me. It was a pleasure.

Jordan: Kelsey McKinney writing and defector and podcasting on normal gossip. That was the big story. For more from us, you can head to the big story podcast.ca. You can also find us on Twitter at the big story fpn. You can write to us. I will give you bonus points and mention you on this podcast in an outro. If you can guess two of the remaining four artists on my Spotify wrapped, nobody’s going to be able to do this, so I’m not going to have to do it. But listen, there’s four other artists on there. If you can get two of them, I will mention you right here, give you a big shout out. You can’t do it, so don’t even worry. The address is hello at the big story podcast.ca. You can also call us, leave us a voicemail that number 4 1 6 9 3 5 5 9 3 5. Joe Fish is the lead producer of the Big story. Robyn Simon is a producer on this show as well. Stefanie Phillips, our showrunner, Mary Jubran, our digital editor, Diana Keay, our manager of business development. I’m Jordan Heath Rowlings, your host and executive producer, thanking you for listening all year. If we are on your Spotify Wrapped, we are so grateful, and if you want to share it, we’d love to see it, but there’s no need to. You can keep your podcast and musical tastes private if you want, regardless. Thanks for listening. We have in this economy for you tomorrow, and we’ll be back with the big story on Monday.