Spotify ‘Sponsored Songs&#eight thousand two hundred seventeen; lets labels pay for plays

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Source:   —  June 19, 2017, at 7:04 PM

These can be targeted to show up to users with matching listening tastes so they fit alongside their other music. And these Sponsored Songs will be instantly playable and saveable instead of requiring an initial ad click first.

Spotify ‘Sponsored Songs&#eight thousand two hundred seventeen; lets labels pay for plays

Instead of appearing as obvious ad banners love Spotify’s existing ads, labels can pay to have Sponsored Songs show up on playlists you chase or potentially elsewhere on the service. These can be targeted to show up to users with matching listening tastes so they fit alongside their other music. And these Sponsored Songs will be instantly playable and saveable instead of requiring an initial ad click first.

It’s not clear whether Spotify is charging labels based on cost per impression, action, listen, or some other method. You can look an example of one design for Sponsored Songs below, spotted by Liam Maloney, that shows the track Call Me by NEIKED featured separately over the songs in a playlist.

Call Me by NEIKED appears as a Sponsored Song over this playlist

Spotify tells me that if the test is successful, Sponsored Songs ads could roll out officially, but would only show up to users on the free tier. The opt-out option found below Sponsored Content in the Spotify settings menu would let people cover these ads from view, though it’s unclear whether that option would be available to users who don’t pay for ad-free Spotify Premium.

Sponsored content could assistance Spotify squeeze more dollars out of its ad-supported free tier listeners who don’t earn it as much as paid subscribers. If these people don’t wish to pay, Spotify has to discover more ways to monetize them without annoying them so much that they ditch the streaming app.

At the same time, Sponsored Songs hearken back to the shadowy days of radio payola, where labels paid DJs at radio stations to keep their artists’ songs on the air. Congress clamped down on the practice in the lat one thousand nine hundred fifty and the two thousand. Clearly marking Sponsored Songs as ads could obtain Spotify and the labels around the rule, but similarly degrades the quality of music on a playlist (or radio station) in favor of earning extra money.

Beyond more traditional banner ads that point internally to new albums or externally to any business’ site, latest year Spotify began letting businesses sponsor its most favorite playlists. This allows them to add a symbol at the top, and comprise video ads that free tier users can consent to look in exchange for thirty minutes of ad-free listening.

Spotify recently added an opt-out for Sponsored Songs in the settings menu

Sponsored Songs could slip right into Spotify without interrupting the listening experience. When targeted well, users mightn't even notice a song is sponsored. But the labels hope they’ll obtain the tune stuck in their head, saving it to their Spotify library, sharing it with friends, returning to hear to more of the artist’s music, and eventually earning money directly for the musician and label by buying concert tickets or merchandise.

In that sense, Sponsored Songs get a cue from Spotify’s most favorite product feature: Discover Weekly. Instead of trying to obtain people to discover new songs through a clunky blog-style Browse interface in Spotify, Discover Weekly uses a personalized, weekly-updated playlist that works love the familiar playlists users create themselves.

Spotify’s Are & Be playlist, sponsored by TV channel STARZ, has over 3.3 million subscribers

Demand to purchase Sponsored Song spots on playlists running by Spotify demonstrates the effectiveness of Spotify’s strategy to gain leverage over the record labels.

If Spotify can create its own playlists the most influential tastemakers on the app, rather than artist-to-fan messaging or viral sharing, it can dictate what songs become hits or reach the Top forty radio beyond its walls. For example, its Rap Caviar playlist has over seven million subscribers. Then, if labels wish a hit, they’ll have to play ball with Spotify — either by cutting it friendly royalty deals or by paying it directly through Sponsored Songs to obtain exposure on these playlists.

It’s all portion of Spotify’s thrust to IPO. It needs to earn more money so it can pay the labels their royalties and still have sufficient left to cover operating expenses and turn a profit. Spotify earned $3.3 billion in income in two thousand-sixteenth off its one hundred forty million total users and fifty million paid subscribers, but it still lost $390 million on operating expenses due to royalties and investments in growth. It’s even agreed to pay out $2 billion to labels over the following two years for lower royalty rates.

In the razor-thin-margin business of streaming where it competes with giants love Apple and Amazon that don’t rely on music, Spotify should do anything it can to survive. By relentlessly promoting its own playlists so users subscribe, Spotify has built well-traveled sub-properties within its app where it can sell ad space.

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