This slide presentation touches upon the impact of Spotify and the music streaming industry on globalization, with a focus on Spotify's latest efforts in Japan, the profitability of streaming for the artist, and the waning need for the traditional major record label.
2. 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.
3. 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.
4. 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
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.”
12. “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.
13. 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.
14. 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?
15. 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.
16. 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.
17. 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.
18. 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?
19. 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
20. 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
