Spotify To Monetize Artist/Fan Relationship With A ‘Two-Sided Marketplace’

Spotify founder Daniel Ek is committed to transforming Spotify For Artists into a "two-sided marketplace" which can monetize the relationship that the 465,000 artists that use the currently free artist marketing and data platform.

The streamer also revealed that a Two-Sided Marketplace would be "margin enhancing" and is at the center of current licensing renegotiations with the major labels.  

A new "pay per click" ad placement that allows artists and labels to announce new releases to both free and paid subscribers is among the first paid products to be released as part of the Marketplace strategy.  Others are still in testing, but tipping artists and micro-payments are of "real interest" to Spotify, Ek shared on Monday's earnings call.

Here is the full Two-Sided Marketplace excerpt from today's Spotify report to investors:

"At our Investor Day presentation in March 2018 we said the goal of our marketplace strategy is to harness Spotify’s ability to drive discovery to connect artists with fans on a scale that has never before existed with the goal of enabling 1 million artists to live off of their work. 

The strategy has been about going from a one-size fits all model to a model that better fits the various types of content and creators on our platform. Through a combination of tools, services, and programs we will be able to serve creators better and build a better business for Spotify by leveraging our demand creation capabilities. 

 

So Marketplace is about meeting the needs of creator teams to create art, engage with, grow, and better monetize their fanbase. These initiatives drive both revenue growth and content cost savings. We expect to give more detail on the financial benefits of the Marketplace and the impact on 2020 guidance on the 4Q19 earnings report. 

Recent highlights of positive developments with our marketplace strategy include: 

 

● Spotify for Artists – Valuable analytics, identity management, and promotion tools with more than 465,000 monthly active artists, up 365% from the 100,000 announced at Investor Day. These monthly active artists account for ~80% of the streams on Spotify. Key recent additions to the feature suite is Canvas – a tool that enables artist teams to add looping visuals to their tracks. Many artists have seen substantial uplift in their streams by using this tool. 

 

● Sponsored Recommendations – Available to select major and independent label partners as part of our recently announced paid beta in the U.S., this is Spotfy’s first cost per click ad product which leverages our listener graph of music tastes to promote new releases to free and paying users. 

 

● SoundBetter – In September, we announced the acquisition of SoundBetter, a music production marketplace for artists, producers, and musicians with 180,000 registered users.