👀 Spotify's Controversial Discovery Mode
Last year, Spotify announced that it is planning to launch a feature that enables artists to get discovered easily, something that has drawn flak from indie labels 💽 to the US Congress 🏛
We write a daily newsletter on all things Music, and the Business and Tech behind it. If you’d like to get it directly in your inbox, subscribe now!
What’s good everyone?
Late last year, Spotify unveiled its controversial new feature called ‘Discovery Mode’, which enables artists to benefit from additional algorithmic plays on the platform, in return for accepting a lower royalty rate for their streams 💰
Sounds like a fair trade-off right?
Artists get to make their songs get discovered more often and willingly accept a lower royalty fee 🤝
However, not everyone is in love with this– especially, the US Congress 🇺🇸 🏛
That’s right, around last month, Discovery Mode attracted the concern of the US House Judiciary Committee, which asked Spotify CEO- Daniel Ek what “safeguards” Spotify is putting in place to ensure the tool doesn’t lead to “a race to the bottom where the only practical way to get recommended is to accept a reduced royalty”.
Confused?
On its official website, Spotify claims Discovery Mode something like 👇🏻
Basically, Spotify is leveraging the fact that getting discovered on its algorithm has become such a big deal for artists, it gives them an upper hand at the negotiating table.
How big a deal is it really?
Spotify’s discovery tools and personalized playlist algorithms are huge. It drives 16 billion artist discoveries every month, meaning 16 billion times a month, fans listen to an artist they have never heard before on Spotify 🎧
The personalized recommendations on Spotify take in 1000s of signals, but to date, they’re not influenced by artists who make music.
Spotify is trying to market ‘Discovery Mode’ as their attempt to fix that, and let artists have a say in getting discovered more often across charts 📈
Check out how some of the signals for their existing algorithm works 👇🏻
While this is a small set of the many other metrics that decide recommendations, Spotify is now ready to tweak this and allow artists to take a pay cut and jump the queue in the discovery charts.
So how will they ensure a fair and transparent practice?
And make sure this does not become a mad race to the bottom? ⬇️
Citing similar concerns, US Congress Representative Jerrold Nadler and Representative Hank Johnson Jr. recently penned a letter to Spotify CEO Daniel Ek to probe the issue 👇🏻
"We write regarding the new 'Discovery Mode' feature that Spotify has begun pilot testing on its Radio and Autoplay features. This may set in motion a 'race to the bottom' in which artists and labels feel compelled to accept lower royalties as a necessary way to break through an extremely crowded and competitive music environment."
"At a time when the global pandemic has devastated incomes for musicians and other performers, without a clear path back to pre-pandemic levels, any plan that could ultimately lead to further cut pay for working artists and ultimately potentially less consumer choice raises significant policy issues,"
While the involvement of Congress in the matters of a Swedish Company like Spotify might not be more than a virtue-signaling tactic, it’s interesting to see the actual ramifications of this letter.
While they do have a point regarding the contribution of copyrights to the US economy, regulation in consumer technology is something which is yet to be solved on a large scale, with companies like Facebook having to tackle data privacy laws with countries like Australia, and the European Union, individually.
Platforms like Facebook and Spotify leveraged the internet to scale their products beyond the geographical boundaries of continents and nation-states 🌏, however, the laws which govern them are still stuck in the past.
But when it comes to Spotify’s new ‘Discovery Mode’, what do the record labels 💽 have to say?
In March, while not specifically naming Spotify’s new feature, European Indie label body IMPALA called for an end to music streaming “payola”, slamming digital tools that offer rights-holders reduced royalties for “privileged treatment in algorithms or other features”.
Does the word ‘Payola’ seem familiar? Chances are you’ve been reading up on our newsletters regularly 🥳
We wrote about it in our piece on the music industry scams in the 90s! If you’ve liked this one so far, why not share it with someone?
US indie label body A2IM meanwhile, has stated that Discovery Mode “brings into question the credibility of Spotify’s recommendation engine”.
And last month, the US-based Artists Rights Alliance straight up compared Discovery Mode to Payola.
However, not everyone is upset.
Two major players in the DIY/independent artist sector have given their positive feedback on Spotify’s Discovery Mode.
DIY music distribution platform TuneCore and its Paris-based parent Believe confirmed that they’ve partnered with Spotify to test Discovery Mode over the past 6 months with a number of artists.
Believe is so keen on the tool, it’s now even investing in “building a dedicated data and digital marketing intelligence platform” in order to select artists and tracks that have the most potential for succeeding in Discovery Mode.
Last month, Believe debuted at the Euronext exchange in Paris, successfully raising roughly 300 Million Euros at a valuation of around 1.9 Billion Euros
Its keenness might have something to do with the following fact👇🏻
New Spotify data revealed today shows that “artists with tracks in Discovery Mode have found over 40% more listeners on average – compared to pre-Discovery Mode” and that “44% of those new listeners had never listened to the artist before”.
A case study shared via Spotify for Artists portrays the experience of Natalie Perez – an indie artist signed to Believe – working with Discovery Mode.
Believe says that in December it “turned on” Discovery Mode for 33 tracks by Perez, who has more than 600,000 monthly listeners on Spotify.
It then ran this campaign for a period of 3 months.
The result?
Of those 33 tracks, 14 performed “exceedingly well”, says Spotify, with Perez growing her daily Spotify listening base in the US and Mexico by 57%.
Our take on this?
It’s a free market.
Blaming Spotify for trying to gain off the distribution that they have worked tirelessly to build with users over the past decade, and helped pioneer music streaming worldwide, is an exercise in futility.
It is a publicly traded company and its fiduciary responsibility is to maximize shareholder returns, which it will do in the manner it ethically deems fit 🤷♂️
Regulation is hardly the best solution here. However, artists are stuck with the dilemma to either accept lower royalties off an already negligible pie or miss out on grabbing user attention 🧐
So what’s the solution?
Build decentralized networks.
Blockchain and Cryptocurrencies enable protocols to be built without requiring intermediaries such as Record Labels or even streaming platforms like Spotify.
Artists can build their own media distribution channels, tokenized their intellectual property, and even design their own monetization algorithms using smart contracts.
While there a lot of cool projects being built around the same, the most popular one being Tidal- Jay Z and Jack Dorsey’s passion project, we at Incentify are also working on a similar vision to free music from gatekeepers like record labels and streaming platforms.
As part of this, our initial product is a tool that lets users share their playlists in a platform-agnostic manner 📲
Ever struggled to share a playlist with a friend who uses Apple Music, while you use Spotify?
We’ve got your back covered 💪🏻
DM us on Twitter or Instagram, or drop a comment to get an exclusive sneak peek into what we are working on 👀