Wednesday, February 21, 2024

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Spotify’s Discovery Mode is pitched as “a tool for music marketers designed to help you find new listeners when it matters to you most.” How it works is Spotify allows an artist to pick a song to prioritize for placements in Artist Radio stations and Auto-play.

How Spotify’s Artist Radio Stations Work

If listeners that stream music from artist A also stream music from artist B, they’ll gain an association and both see their songs show up on each other’s radio stations. The more their listeners intersect, the more often their songs will appear.

How Spotify’s Auto Play Works

When a playlist or album reaches completion, to keep the user on the platform Spotify will automatically play more songs it thinks matches what was being streamed.

Spotify’s Discovery Mode Requirements

You’re required to have at least 25K monthly listeners and have a minimum of 3 songs on the platform in order to qualify for Discovery Mode.

Spotify’s Discovery Mode Commission

Spotify will take a 30% commission on all streams generated in places where Discovery Mode is active.

This means Spotify will take 30% of the revenue generated from all streams from Artist radio and Auto-play, including the ones that aren’t being driven by Discovery Mode. They’re also careful to note that ” This signal increases the likelihood of the selected songs being recommended, but does not guarantee it.” So there’s a possibility that you end up losing 30% of the revenue from streams you already get with no benefit.

Artists can choose to opt-in or out of Discovery Mode so receiving no benefit seems to have an easy fix, opt-out. When you analyze it under a different lenze you’ll see why that’s not such an easy choice to make.

Imagine your employer creates a program where work hours are prioritized for employees willing to accept 70% of the standard wage – a $10 an hour wage would mean accepting $7 an hour. If some of the workers are willing to accept $7 an hour, they’ll force all the other workers to do so as well or lose their hours.

Let’s say we both earn $100 in revenue from Spotify radio respectively. Spotify comes along and says that if I’m willing to accept 30% less, they’ll give me the streams you were getting. You lose $100, I gain $40, and Spotify saves $60. Now, Spotify says to you that if you’re willing to accept 30% less as well, they’ll return your streams. You’ll only get $70 in royalties and not $100, but that beats zero. If you take that deal, we both end up earning $70 for the same amount of streams we were previously getting $100 for and Spotify saves $60.

Artists can’t simply opt-out because they then become a victim of whoever opts-in. At the end of the day, there’s only a short term benefit to whoever opts-in because as more artists do so, their streams will regress. Eventually, all artists just end up earning less.

Payusnomind’s Final Verdict

Discovery Mode is bad news but there isn’t much artists can do about it beyond pulling their music from the service. It shouldn’t exist but the fact that it does means artists are forced to comply until it doesn’t. All artists are paid from the same revenue pool so if a few artists are inflating their streams, it means other artists earn less. We are firmly in the grips of a race to the bottom as far as Spotify is concerned and artists should be working on alternative means of monetization beyond Spotify.

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