Spotify and the Globalization of Music

By Jacob A. McGinnis

Summary

The music streaming giant Spotify is working on extending its reach to Japan, the worlds second largest global economy and music market.

Some obstacles to Spotify’s success in Japan are that Japanese consumers still prefer hard copy CDs, and there is a lot of resistance from record labels to make the switch to streaming.

This recent development is part of a large-scale plan by Spotify to expand into Asia, a plan that started in 2013 with Singapore, Hong Kong, and Malaysia. Spotify’s next step in this plan is India.

Summary

Spotify feeds globalization by connecting artists from all around the world to consumers from all around the world.

Spotify is profitable for artists, but not for labels. Labels are becoming obsolete as more independent artists arise.

About Spotify

Below is a brief video highlighting Spotify’s growth throughout the years.

http://www.telegraph.co.uk/technology/technology-video/12033877/the-history-of-spotify.html

Spotify and Globalization

Businessdictionary.com defines globalization as “The worldwide movement toward economic, financial, trade, and communications integration.”

Spotify aims at making music streaming the norm in Asia as it carefully establishes its Tokyo team and sets its sights on India as its next target.

Streaming makes it possible for artists from around the world to reach audiences from around the world more easily.

Example: The Japanese pop/alt rock band Sekai no Owari (End of the World) is currently in the process of getting their catalogue on Spotify, with plans to release their first full English album sometime next year.

Spotify and Globalization

Although Spotify recently passed the 40 million paid subscribers mark, it is clear that there is definitely room for expansion as far as global coverage is concerned.

Consumer culture varies from country to country. For example it is difficult for Spotify to expand to places where the use of electronic purchases are still not the norm.

This map illustrates what countries Spotify is currently available in.

Music in Japan

Although CD sales are dropping all around the world, CDs still account for about 85 percent of all music sales in Japan.

This is likely due to Japanese consumers enjoying collectibles, such as “Greatest Hits” albums.

Example: Japanese pop group AKB48 were the first to sell CDs with redeemable concert tickets in them.

The corporations that own the rights to Japan’s music are extremely protective and cautious of taking risks in licensing to new services. This is a major factor holding Spotify back from Japanese expansion.

Streaming in Japan

In early Summer 2015, two music streaming services launched in Japan: Line Music and AWA.

Line Music is owned by Line text-messaging service and Sony Music Entertainment Japan. Sony is Japan’s largest record label.

AWA is owned by Japan’s second largest record label, Avex Group Holdings and Cyber Agent, which is an IT company.

The Line Music app had 8 million downloads in the first eight weeks after the launch. AWA had 1 million downloads in its first week.

Consumers, however, were unhappy when their free trial memberships ended, with very few of them willing to pay the per month service fee.

The Spotify Difference

Unlike other music streaming services, Spotify is free to use for an unlimited amount of time.

Spotify makes its profits off of advertisements, making it more like a digital radio service, with the difference being the consumer’s ability to choose the songs.

Spotify’s mobile app forces users to shuffle their songs, and the service even tosses in some “Suggested Songs” every now and then.

This method of streaming is compelling to users who wish for complete, uninterrupted control of their music to make the switch to paid premium, without having to cut them off with a limited free trial membership.

Globalization and Streaming: The Artists Although record companies are resistant to converting to streaming

services, streaming could be better for the artists. What Spotify essentially does is cut out the middle man, meaning

that production, distribution, and retail sales become obsolete and unnecessary.

With over 30 million songs available to each Spotify listener, consumers are now able to access music from artists they may not have otherwise been able to find in stores.

Globalization and Streaming: The Artists A study by two economists, Joel Waldfogel and Luis Aguiar, shows

that streaming and music purchases are about even as far as profits are concerned, with 137 streams equaling one track sale.

Artists make $0.82 per song download in the itunes Store. Combining the data, that would mean that artists make $0.82 on

Spotify with every 137 streams. That may not sound like much, however…

To put that in perspective, let’s take a look at Ed Sheeran’s hit single “Thinking out Loud.”

“Thinking Out Loud” on Spotify

Ed Sheeran’s hit single “Thinking out Loud” was the first song on Spotify to have 500,000,000 streams.

500,000,000 divided by the 137 streams per song is about 3,649,635. Multiplying that by the equivalent $0.82 that artists make from each track on itunes, we get 2,992,700.

This means that Ed Sheeran made almost $3,000,000 from a single song on Spotify alone. This math does not take into account other streaming services, such as Apple Music and Pandora, as well as CD sales which do still exist, even as they dwindle.

Globalization and Streaming: The Labels So if artists are making money from streaming, and if streaming

opens the floodgates for all artists everywhere to connect to all audiences everywhere, what’s the problem?

Labels make their money from symbiotic relationships with artists: The artists write the songs, and the label provides the equipment to record the songs.

Labels also provide mass advertising campaigns, working for the artist to ensure the most exposure for the most profit.

However, labels are becoming obsolete as more independent artists arise.

DIY and the Fall of the Record Label

Imagine a scenario in which a fictional character named Jim Blackmore decides he wants to write a song. What will it take for him to get from his idea/dream to the end result of having his music listened to by the public?

Jim is a singer and a guitarist, so he already owns a guitar. He just has to buy a microphone and recording software.

Decent USB mics that plug directly into one’s computer are about $130.

Quality recording software can be bought for around $300 This means that $430 later, Jim has his song written, recorded,

produced, and mixed, but what about advertising?

DIY and the Fall of the Record Label

Social media accounts such as Facebook, Twitter, Instagram, and Snapchat, are free, even for page creation and maintenance.

There are numerous DIY resources that deal with music marketing and advertisement in the digital age, making it possible for Jim for to become an expert, provided he does his research.

Jim was able to do all of this, from conception to release, without “signing his soul away” to any major record label looking to exploit him for their own gain.

DIY and Streaming

So, if artists don’t necessarily need labels, and streaming provides profit, what’s keeping artists from going straight to Spotify, rather than looking to sign record deals first?

In our example with Jim Blackmore, the artist was able to write, record, produce, mix, and release all on his own, but nothing was said about a key component to worldwide success: networking.

Record labels have connections, which means that instead of the individual artist having to seek out booking agents, promoters, etc., the label provides it all.

Unfortunately, this also often means a lack of control for the artist.

Putting it All Together

Although Japan is proving to be a difficult country to convert to streaming, Spotify is patiently waiting for the right time to release its service to the Japanese public, which is planned sometime this month.

Spotify feeds globalization, pays artists, and cuts out the need for major record labels, leading to an uprising of independent artists.

Spotify continues to grow in users as it expands across territories around the world, providing consumers with instant access to over 30 million songs.

Questions

What could Spotify do to ensure popularity and widespread success in Japan? What could they offer consumers that would make them want to turn to streaming rather than CD collectibles?

Is the globalization of music a good thing? Why or why not? Is there a way major record labels can compromise with music

streaming services such as Spotify, such that they remain necessary to the music releasing process?

What impact will the dwindling of physical music distribution have on the global economy? Will it create jobs, as services such as Spotify take over the market, or will it destroy them, as factories for producing hard-copy CDs shut down?

Works Cited

Russel, J. (September 15, 2016) from https://techcrunch.com/2016/09/15/spotify-japan/

Buskirk, E.V. (October 12, 2015) from https://insights.spotify.com/us/2015/10/12/ed-sheeran-listening-map/

(n.d.) from http://www.businessdictionary.com/definition/globalization.html

Chandler, N. (October 3, 2011) from http://electronics.howstuffworks.com/gadgets/audio-music/spotify1.htm

Works Cited

Spotify, Ltd (n.d.) from https://www.spotifyartists.com/spotify-explained/

Sisario, B. (September 16, 2014) from http://www.nytimes.com/2014/09/17/business/media/cd-loving-japan-resists-move-to-digital-music-.html?_r=0

Morikawa, J. (December 27, 2015) from http://www.japantimes.co.jp/culture/2015/12/27/music/future-japanese-music-depend-streaming-services/#.V96ida0sNJ0