Spotify is Not a Music Business
by Ebun Lawore, Staff Writer
Ever since I told my dad that I was gonna major in music, it seems as if his main goal is for me to get an internship at Spotify. “Look at this person who interned at Spotify!" he says. “Has Spotify opened any internships for next summer?” he asks. And I don’t really know how to explain to him that I don’t want to intern at Spotify, because to him, it’s the most successful music company in the world. In reality, it’s not a music business at all. I don’t know how to explain it to my dad but for some reason I’ve made it my job to explain it to you all. So I'm gonna try my very best.
As most of you may know by now, Spotify’s CEO Daniel Ek has become chairman of the company Helsing, a German defense technology company focused on developing AI software for military use. Prior to that, Ek raised $700 million dollars for Helsing through his venture capital company, Prima Materials. Understandably, many users and artists are outraged. Many listeners have canceled their subscriptions, and several prominent indie artists such as Deerhoof and King Gizzard and the Lizard Wizard have taken their music off of Spotify entirely.
Furthermore, many people are shocked and confused as to why the CEO of an organization tied to the music industry would ever take interest in investing in a company that seeks to create weapons of mass destruction powered by AI in the first place. After all, many of the biggest artists on Spotify are openly anti-war, and condemn excessive uses of AI, especially considering the threat it poses to the music production industry.
The reason why Ek can have one hand in war drones and one hand in The Weekend’s entire discography is because Spotify isn’t a real music business. At least, it isn’t anymore.
Many attribute the public’s growing desire for cheaply accessible music and the rise of streaming to Radiohead. About eighteen years ago, Radiohead released their hit album In Rainbows by uploading a “pay what you want” file of the album onto their website. This act was revolutionary, and exposed listeners to the idea that music could be extremely inexpensive, maybe even free.
Ever since then, there has been a growing demand for cheap music, but the rise of it was slow. Pandora tried to fill the gap, but failed to gain wide popularity. Subsequently, Spotify came through in 2014, and immediately exploded in popularity. But there was one main issue; they weren’t making any money.
Believe it or not, music streaming isn’t a profitable business model. Even though Spotify seems like they’ve been very successful, they actually didn’t have a profitable year until 2024.
The lack of profit is for a multitude of reasons. First of all, Spotify had to spend a long time convincing music giants that their company was a worthwhile investment. When they initially started out, many artists and industry executives spoke out against the platform, saying that it was robbing artists, labels, songwriters, and producers of the compensation they deserved. Once they were finally able to convince a number of major labels to put their catalogs onto the site, they had to allocate 70% of their revenue to those labels. And because most music is owned by the same three record labels, they didn’t really have room to negotiate on this.
The reason why Spotify struggled to make profit, and platforms like Apple Music and Amazon music didn’t is because the latter two are a part of massively successful enterprises. Music streaming is a tool to grow their ecosystems: it was never meant to be their main source of revenue.
So Spotify realized soon enough that it was not sustainable to continue being a music business, and they became….something else. I don’t really know how to describe Spotify now; maybe an audio platform?
Anyways, you can tell that the vision for the company changed because of the decisions they started to make. They started to heavily promote their podcasts and audiobooks, almost more than they promoted their artists, as seen in their controversial $200 million dollar podcast deal with Joe Rogan, which caused artists such as Joni Mitchell and Neil Young to remove their catalogs from Spotify in protest. However, this demonstration didn’t last very long, because Spotify no longer cared about the little profit they made from their music.
This is also why Spotify promotes their bundle subscriptions with platforms such Hulu and Disney plus, even more than their solo subscriptions. The bundles actually give them a discount on the rights they have to pay major labels, giving them a larger profit margin. Now, in order to make money, Spotify doesn’t just say “listen to more music.” They also say “listen to more music and watch more movies and TV .”
It’s pretty obvious that Spotify is evil because it only cares about profit. Every company only cares about profit; that is the point of a company. However, the “evilness” we feel radiating from Spotify comes from the fact that they don’t care a lot about the service that we all download the app for in the first place. To them, music is a marketing tool rather than their primary product they offer. To us listeners, music is the air that we breathe. That’s why in Daniel Ek’s head, using the money he’s made from Spotify to invest in Helsing doesn’t seem that crazy. He is just expanding his source of profit: the same thing that he’s been doing ever since Spotify stopped being a music business.
