Spotify sells your user data

Spotify Teardown. Inside the Black Box of Streaming Music Authors
DATA SALES / Spotify does more than stream music. They also conduct a comprehensive profiling of their users and market this information commercially.

The streaming service Spotify does not want to be looked at in the cards. They want to control the audience's perception of what they are doing, and not least what they have done in the past. Founders Martin Ek and Martin Lorentzon today like to talk about how an early interest in music was their driving force, but originally they worked with a file sharing service for all types of digital content, which was similar to the (illegal) file sharing service The Pirate Bay. Spotify was officially launched in 2008, but had been active for a couple of years already as a closed pirate network: Users uploaded music they had on their private PCs and shared it with the network.

In May 2017, Spotify's Legal Department sent a letter to the authors of this book regarding an ongoing research project they were involved in, called "Streaming Heritage: Following Files in Digital Music Distribution". Spotify claimed that the academics' project had broken the rules for using Spotify and pointed out that this could trigger a claim for compensation. It gradually emerged that Spotify had also tried to stop the financial support the project received from the Swedish Research Council.

Collects user data

Spotify wants to control the use of Spotify, but does not want to be controlled itself. As all users of the service have discovered, it has changed from a music library to a directory of moods – "moods" – to which they offer playlists. They also make personal suggestions based on what the user already likes. The purpose is to get users on curated lists, since Spotify has commercial agreements with manufacturers of such.

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Spotify runs a comprehensive collection of user data. Not just for your own use; the information is also sold to other players and advertisers. If you read the legal agreement you must accept in order to use Spotify, you will see that they want access to personal information on your mobile phone or computer. Particularly extensive is Spotify's collaboration with Facebook, which does exactly the same thing: collects data and creates user profiles that are sold to others. It is planned that you can easily share the music you play on Spotify on Facebook (with a direct link to Spotify), and that you can get a list on Spotify that shows what all your Facebook friends on Spotify are listening to – unless there are private (hidden) lists.

Deficit

One can get the impression that Spotify dominates the music streaming market and that the business is doing brilliantly. But Spotify has not yet earned a single penny. The company has large deficits and is constantly dependent on the supply of new venture capital. Therefore, those who invest do not do so to make money now, but with a view to a favorable acquisition in the future, when the company is big enough. This, in addition to the fact that Spotify is dependent on licenses from the record companies, makes the company very vulnerable.

Spotify is running high deficits and is constantly dependent on supply
of new venture capital.

At the official launch of Spotify, it was presented as an advertising-funded free service. This has been heavily toned down. In 2015, which Spotify proclaimed as its "best year", only ten percent of revenue came from advertising. In other words, paid subscriptions make up most of the revenue. The artists do not earn much either. Revenue per play on Spotify is usually close to half a cent – pop star Lady Gaga received 0,23 øre per play in 2009.¹ At the same time, it is a favor of the big artists: Remuneration does not happen per play, but after a pro rata system: That is, how large a share a playback has in relation to all other plays that take place at the same time. This means that companies with a large catalog and many artists come out better than small and independent companies.

Digital tracks

The development of Spotify clearly shows a transition from the music library (where you find the ten artist, song or album) you want to listen to, to a total package that will be your companion from morning to night: On Spotify you can find music for any activity or any mood, you are hinted at festivals and concerts, and links have recently been added to so-called merchandise: effects associated with various artists. All your activity on Spotify is used by Spotify to generate even more activity. And as mentioned: This data is not for internal use only. All traces of your activity are collected, sold and distributed in the open market. Therefore, what you pay to use Spotify is not just the subscription price. In addition, you give away valuable information from the digital tracks you leave behind.

It does not seem that such information scares "most people". The attitude seems to be: "I have nothing to hide", and the data collection is rejected with a grin. In addition, the alternative to streaming is to buy CDs or vinyl records – so cumbersome and expensive that it only appeals to those who are particularly interested.

It is impossible to predict where Spotify will be in a few years. Perhaps they will have gotten an even more comprehensive grip on the streaming market. But if one or more of the major record companies withdraw their licenses, or access to risk-averse investors fails, it could be a swift and brutal end.


1. dagbladet.no: Get 0,23 cents per play on Spotify.

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