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FORTUNE.COM // NOVEMBER 2019
Macs around the globe to leverage for Apple Music; Amazon
has sold more than 100 million devices with its Alexa personal
assistant and counts more than 100 million members of Prime,
both of which allow for access to its music catalog. Whereas
Spotify must fight for every eyeball on someone else’s device, its
well-heeled rivals can activate a customer base overnight. That
Spotify continues to grow is a testament to its strong engage-
ment figures, but the threat to its future prospects remains.D
ANIEL EK glances around nervously. Gayle King, the
CBS This Morning anchor, has just asked him live on
the air how, after three icy years, he managed to mend
Spotify’s broken relationship with Taylor Swift. “She’s
got a song, ‘Love Story,’ that says, ‘Baby, just say yes,’ ” King offers
with a smile. “Is that what you did?”
“It was slightly more complicated than that,” the CEO says
with a chuckle, adding that it took several trips to Nashville to
convince the pop star that streaming had come around enough
for her to reconsider.
In truth, Ek always had the upper hand. It’s in the interest of
artists signed to major labels—including Swift, who has a world-
wide deal with Universal Music Group—to be on every platform
where they have listeners. Spotify has done nothing but build
that base since its spat with Swift; in the interim, physical album
sales have fallen off a cliff. It was only a matter of time before
economic pressures would push Swift into Spotify’s open arms.
That’s not to say that Spotify has solved the one bugaboo that
continues to dog it: artist payouts. By the company’s own calcula-
tions, more than two-thirds of its total revenues are funneled back
to artists, record labels, publishers, and distributors. And yet, the
itemized numbers for streaming revenue feel distressingly low.
Spotify is cagey about revealing specific figures and payout
rates, which depend on label agreements. But reports have
pegged rates between three-tenths and eight-tenths of a cent per
stream—or up to $8,000 for a million streams. Most of that goes
to the master holder of the song rights. The songwriters them-
selves get less. (A ruling last year by the U.S. Copyright Royalty
Board aimed to hike songwriters’ share by almost half; it’s stuck
in appeals.)
Those figures aren’t unique to Spotify. Apple and Amazon pay
similar rates, industry sources say. Tidal, the troubled streaming
service co-owned by a roster of famous artists and Sprint, pays
a little more; Pandora, the pioneering radio service owned by
SiriusXM, pays a lot less.
Taken as a group, though, the streaming services have proved
to be a powerful engine for listeners to discover artists and a
growing revenue generator for labels. As one music executive
puts it: “We’re frenemies. We need each other. It’s in our interest
for them to be as dependent on us as possible. And our artists
need to reach as many customers as possible.”
To stay on top, Spotify must keep that balance between
partner and adversary with the record industry. And just to
be safe, it should probably avoid starting any new fights with
Taylor Swift.T HE FU TURE 50 —SPOTIF Y
Apple Music
An Apple exec confirmed
in June that the ser vice,
which launched in 2015,
had 60 million paying
subscribers. And Apple’s
marketing heft plus the
enduring popularity of
the iPhone is a good for-
mula for winning new
customers. At $9.99 per
month, it costs the same
as Spotify premium.
Amazon Music
Unlimited
Amazon got a late start
in music streaming, de-
buting in 2016, but is
now growing faster than
the market leader. Sub-
scribers increased 70%,
to 32 million, over the
past year compared with
25% for Spotify. Ama-
zon’s big advantage: its
popular Echo line of
smart speakers, which
use Amazon Music as
the default. Its premium
ser vice is $7.99 a month
for Prime members.
Pandora
The radio-like service
that changed the way we
listened to music more
than a decade ago was
acquired for $3.5 billion
by SiriusXM Satellite Ra-
dio in Februar y. Adver-
tising and subscription
revenues are up. But
overall monthly active
users fell from 71 million
to 64.5 million over the
past 12 months.
Tencent Music
Entertainment
With a staggering
652 million monthly ac-
tive users in China—31
million paid—Tencent
has massive scale in a
market where Spotify
doesn’t compete. (But
Spotify owns a 9% stake
in its Chinese rival.) Ten-
cent, which went public
last year, generates rev-
enue not just from music
but additional services
like online karaoke and
live-streaming.YouTube Mus ic
Google has struggled to
build its subscription
media businesses, but
the company gave it an-
other go last year with
the launch of YouTube
Music. Priced at $9.99 a
month, the ser vice not
only offers access to
artists’ catalogs, but
also remixes, covers, live
performances, and mu-
sic videos. Together with
the older Google Play
Music being folded into
YouTube Music, Google
reportedly now has
more than 15 million
subscribers.Tidal
Despite high-wattage
backers like Jay-Z and
Beyoncé, Tidal has yet to
really catch on. Esti-
mates have pegged the
pricey ($19.99 a month)
ser vice with about 3 mil-
lion subscribers. Still,
the ser vice has been
praised for its high-
fidelity, lossless audio
quality. In September,
Tidal struck a deal to
bring its platform to
Roku, making it an en-
tertainment option for
the smart home.Spotify dominates the global music-
streaming market with 108 million
premium users—nearly 50 million more
paying customers than its closest com-
petitor, Apple. But the Swedish company
has a host of fierce rivals. —Aric Jenkins