Risk, returns & timeframes illustration
6 min read
December 5, 2023
by
Belinda Nash

Spotify Wrapped: Big data-mining in the subscription economy - stock soars 143% in one year

LAB and Six60 topped Aotearoa listening charts in Spotify Wrapped but how much were Kiwi artists paid by the Swedish music streaming giant? And are cracks beginning to show in the subscription economy that may limit consumer choice but can help company profits soar?
6 min read
December 5, 2023
by
Belinda Nash

Spotify Wrapped: Big data-mining in the subscription economy - stock soars 143% in one year

LAB and Six60 topped Aotearoa listening charts in Spotify Wrapped but how much were Kiwi artists paid by the Swedish music streaming giant? And are cracks beginning to show in the subscription economy that may limit consumer choice but can help company profits soar?
6 min read
December 5, 2023
by
Belinda Nash

Spotify Wrapped: Big data-mining in the subscription economy - stock soars 143% in one year

LAB and Six60 topped Aotearoa listening charts in Spotify Wrapped but how much were Kiwi artists paid by the Swedish music streaming giant? And are cracks beginning to show in the subscription economy that may limit consumer choice but can help company profits soar?
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Unboxing your Spotify Wrapped. 🎁 Whether your top artist was someone you’d never heard of let alone streamed - pointing to a possible hack - or your year came up roses, with your most streamed track lining up with the world’s most streamed track: Miley Cyrus’ ‘Flowers’, last week, Spotify Wrapped had us rapt.

But shouldn’t we be mad about all this data-scraping? 😤 Spotify (SPOT) launched Year in Review in 2013 in what Spotify vice president and global executive creative director Alex Bodman told Variety in 2021 was a ‘loyalty play’ rather than a stroke of marketing genius. The Swedish streaming giant then began regifting streamers’ own personal data back to them in 2016 as Spotify Wrapped, with fancy, shareable packaging. 

Last week, around 574 million Spotify streamers, of whom 226 million are Spotify’s paid subscribers, received their streaming highlights, collected between 1 January and some time after 31 October. And if Wrapped’s 2022 legacy of millions of social media posts continued, Spotify users again shared their prettily-packaged listening recap to friends and followers across social media.

But isn’t this example of big tech’s big data sharing… creepy?

Spotify is watching. 👀 Following last year's Wrapped, Fight for the Future director Evan Greer told Wired:

‘This is a particularly shining example of the fact that Spotify’s business model is based on surveillance. Spotify has done an amazing job of marketing surveillance as fun and getting people to not only participate in their own surveillance, but celebrate it and share it and brag about it to the world.

And in talking about Spotify Wrapped’s explosion across everything from social media to billboards and Roblox last week, The Guardian’s Alexis Petridis - who labelled the constant monitoring ‘creepy’ - said:

‘At heart, its message is that something, somewhere is effectively spying on you, carefully taking note of everything you listen to and when – and it’s also a reminder of how many other companies are doing the same without actually presenting their findings back to you.’  

Indeed, Meta’s (META) Facebook came ‘under fire’ in 2018 for their use of big data in the Cambridge Analytical scandal, scrutiny it would seem - so far - that music apps have dodged.

Played on repeat. 🎧 Other music streaming services also wrapped the year last week: 

But not everyone’s Wrapped with Spotify. 😡 The ‘hated’ by some streaming app posted their third quarter (Q3) profit of US$68.9 million in late October. And last week, Spotify was called out on Instagram by the US-based United Musicians & Allied Workers (UMAW) union for paying just $US0.003 to artists for each music track streamed. 

This is a sum that for artists like Damon Krukowski is heading to an ‘absolute zero’ income from his more than three decades of creative work, and also appears to be at odds with Spotify’s mission to give ‘a million creative artists the opportunity to live off their art’. In context, to earn a before-tax wage of US$75K, musicians would need their tracks streamed 25 million times for their payday to come to town.🎅

Did Spotify's social media ripple hit the markets? 

Spotify (SPOT) is a pure play streaming app and this February they launched their AI ‘DJ’, boosting the listener experience and elevating the app’s role in the future of listening. The company holds a market cap of US$38.07 billion, and through November, their stock rose nearly 6.3% and has soared 133.5% year-to-date (YTD), and 143% in one year. But despite the market lift, Spotify is now entering their third round of job cuts, slashing 17% of their workforce.

The new world economy: the subscription economy

How big business gets bigger. 💰 Research by Stanford and Texas A&M economists found that consumers forgetting the subscriptions they have and no longer need can boost companies’ revenues by up to 200%. And Spotify is not the only product and service provider clipping the ticket from set-and-forget subscriptions. Among many, others include: 

Peaks and troughs of the subscription economy. 🏔️ Aside from data mining scrutiny, the subscription economy may have other challenges ahead:

  • FTC regulators are shutting down the era of impossible subscription cancellations, saying ‘Companies should not be able to manipulate consumers into paying for subscriptions that they don’t want’.
  • Subscriptions reduce consumer choice with more than half of consumers saying they’d prefer to pay as they go
  • 60% of companies say around one-fifth of their users churn and return, in particular Gen-Z and millennial subscribers
  • Apps like Trim and Rocket Money clean up users’ subscriptions.

While AI brings big possibilities to big tech’s subscription economy, when it comes to personal data being captured, it may remain a case of buyer beware.

Like this? 👍 Then you might like: Tech titans’ mega-cap earnings: AI optimism or AI bubble? 🫧

Never miss a Hatch article. Follow the feed on Google News! 📰 

Belinda Nash
Finance writer
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We’re not financial advisors and Hatch news is for your information only. However dazzling our writing, none of it is a recommendation to invest in any of the companies or funds mentioned. If you want support before making any investment decisions, consider seeking financial advice from a licensed provider. We’ve done our best to ensure all information is current when we pushed ‘publish’ on this article. And of course, with investing, your money isn’t guaranteed to grow and there’s always a risk you might lose money.

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