A New Tool From Spotify Walks the Line Between Advertising and Pay-For-Play
According to confidential documents obtained by Rolling Stone, the streaming service’s new advertising tool promises extra listeners to the artists (or labels) that can afford it
At the end of October, Spotify nearly formalized a rate for labels willing to pay to increase their artists’ streams. Spotify will now make full-screen notifications — a pop-up prompting you to listen to Taylor Swift’s Lover, for example, on its day of release — available for purchase as part of a new initiative called Marquee meant to boost its advertising revenue.
According to confidential documents obtained by Rolling Stone, every time a Spotify user clicks on one of those advertisements, the artist or label will fork over $.55. They spend that money hoping that a portion of those curious clickers will then go ahead and hit play on the advertised music, helping artists boost their stream counts.
In Spotify’s pitch deck, which was sent to a distribution company, the platform advises artists and labels to spend at least $5,000 on these campaigns. If an artist pays that minimum amount at $.55 a click, the smallest campaign should bring in more than 9,000 potential listeners over a seven-day period.
The streaming service’s announcement immediately drew comparisons to pay-for-play at radio or, maybe more accurately, the retail variation, where record shops asked labels to pay for premium positioning. “Stores would say, ‘we want you to pay us for this space,’” explains George Howard, a professor of music business and management at Berklee College of Music. “Spotify is saying, ‘we want you to pay us to display your records.’ All this does is continue what payola always has done — the major labels, which have the most money and the most frequent releases, get the most play, consolidating the amount of art that is put out there.”
Charleton Lamb, a Senior Product Marketing Manager for Spotify who helped develop Marquee, hits back against any notion that streams are now for sale. “We’re hopeful that our recommendations are useful, that we’re able to match [artists] with people who are going to be interested,” he says. “But you’re not paying for streams. Every listener has the choice to either engage or not.”
Spotify’s decision to expand its arsenal of paid advertising tools does not come as a surprise. The streaming service became a public company in 2018, bringing new pressure to become profitable (Spotify has been sporadically in the black since the last quarter of 2018) and find additional ways of generating revenue. Revenue from advertising has become a special focus: Last month, Spotify CFO Barry McCarthy announced the company’s intention to increase it from 10% of overall sales to 20%.
Marquee appears to be part of this effort. Spotify had already been sending recommendation notifications, but they had been entirely dictated by internal judgements. “It was something that labels would have to pitch for,” Lamb says. Greenlighting Marquee ads “depended on what made sense for us, labels, and our listeners at that time.” Now Marquee is open to all those who are prepared to open their wallets to reach users in the U.S. (For streamers outside of the country, the notifications will still be doled out via the old system.)
“There’s a floor of $5,000, and that potentially discriminates against smaller labels and artists,” says Richard Burgess, CEO of A2IM
Spotify already offers several types of in-platform advertising, but Marquee represents a step forward in effectiveness. While free users are subject to advertisements from labels, “Spotify audio ads don’t typically move the needle,” says one digital marketing expert with music industry experience who spoke on the condition of anonymity so as to avoid jeopardizing professional relationships. Spotify also offers banner promotions on the desktop app, but the digital marketer says response “isn’t great, because there aren’t that many users on desktop.”
Marquee will have wider reach, allowing artists and labels to get at coveted Spotify subscribers in addition to free users. This ad tool theoretically has more impact as well: Spotify claims that Marquee’s “click-through rate” — how many users see an ad and immediately go to the new album — is 21.7%, much higher than comparable rates on Instagram or Twitter, according to the documents obtained by Rolling Stone. Spotify also maintains that “listeners who receive a Marquee [ad] stream 17% more than those in a holdout group for the same campaign.”
Some organizations are already seeing positive results from the program. “It’s worked well for us,” says J Erving, whose distribution company Human Re Sources has a direct deal with Spotify and was an early tester of Marquee. “We’ve implemented it into our rollouts. We used it for Pink Sweat$” — a rising R&B singer who has amassed more than 190 million streams this year, according to the analytics company Alpha Data.
Despite Marquee’s apparently meteoric click-through rate and positive early reviews, Spotify will not bombard listeners with pop-up ads every time the app is opened. Subscribers can choose to turn off the notifications, and Spotify limits the numbers of ads listeners will see — a maximum of one ad per day and two a week. The platform will also disclose that the ads are sponsored, though it will not say who sponsored them. And in the company’s pitch deck, Spotify promises potential partners that it will “pursue a PR strategy to share the value of these messages [push notifications] to listeners and control the narrative in the media.”
There are two primary concerns about Marquee. The first is that the tool makes an already heavily consolidated music business — three major labels received nearly 70% of the industry’s revenue in 2018 — even more consolidated. And the second is for those who choose to spend on the ads: Will they be cost-effective?
The ability to pay for access to an audience, whether on the radio, in a record store, or, now, on Spotify, typically leads to fear that an unequal system will become even more imbalanced. Wealthy major labels can afford to pay for play, while artists with less resources cannot, so the rich get richer while others remain consigned to pop’s periphery.
Several members of the independent artist community are nervous that Marquee might have the same effect. “There’s a floor of $5,000, and that potentially discriminates against smaller labels and artists who don’t have that kind of money to spend,” says Richard Burgess, CEO of the American Association of Independent Music.
“The money we’ve spent on Spotify advertising on the platform has never been recouped by activity on there,” says a Latin label source
There also appears to be no upper limit on Marquee spending, which means rich artists or labels could theoretically sink millions of dollars into buying clicks, some of which will turn into streams. “In addition to the minimum-spend issue, I have concerns when there’s not a cap [on spending],” says Louis Posen, founder of Hopeless Records. “That gives an advantage to those who have an unlimited well.”
Often, though not always, that means major labels. “Majors will spend the money [on Marquee] like they do on radio, whether it works or not,” says Allen Kovac, CEO of the independent rock label Better Noise Music. “If you give the majors a chance to put their thumb on the scale with advertising dollars, and they have the size to outspend indie artists and labels, what exactly are you trying to accomplish?”
In Spotify’s pitch deck, the company offers an answer of sorts: Marquee aims to “drive incremental streams during the critical first weeks of a new release and help build an audience that keeps streaming over time and remains engaged.” Spotify does not mention its quest for additional sources of revenue.
Lamb also believes Marquee “allows you to really draw that focus and attention so that people create a relationship with your album in its entirety.” “It’s not just, ‘let me hear this one single next to 50 other songs,’” he continues, pointing to popular, singles-centric playlists like New Music Friday and Release Radar. “This is a chance to say, ‘Look at this entire body of work that maybe you want to listen to four or five times over the weekend.’”
While Spotify will reap value from Marquee’s $5,000 price tag, industry sources expect that these ads will be money-losers for artists and labels in the short term. That’s because Spotify pays out very little — at the high end, the platform metes out around $.008 per stream. “The money we’ve spent on Spotify advertising on the platform has never been recouped by activity on there,” acknowledges a label source with extensive digital marketing experience. In this case, “You’re banking on that person who clicks either being or becoming a super-fan. Otherwise, you flushed that money down the toilet.”
“Awareness is a big thing for us,” says J Erving of Human Re Sources. “[Marquee] is another way to create awareness.”
Some in the music industry contend that shelling out the money can be worth it, but the benefit won’t come on Spotify. “The payout is so minimal on these actions, the real end-goal is to climb the charts,” the digital marketing expert says. “You get a brand-lift from [doing] that.” If a large Marquee campaign made a sizable difference in streaming activity over a seven-day period — in theory, a $100,000 spend would bring around 180,000 potential listeners to an album — and elevated an act’s chart position, he or she could theoretically use that as leverage to improve touring opportunities, secure a feature in a publication, or try to land a TV performance.
Erving focuses on Marquee as a tool for “to create awareness” rather than improve chart position. “When we’re pushing for support from the streaming services on the playlisting side, the timing around that is super important,” Erving says. “If you go too early, the analytics come back negatively — skip rates are high, folks aren’t downloading, aren’t sharing,” because listeners are innately wary of the unfamiliar. “You haven’t laid the foundation,” Erving adds. “This is one of those foundational tools.”
Spotify is not the only streaming service to offer an advertising program that doubles as a way to “drive incremental streams.” YouTube, for example, has an analogous tool already. SoundCloud unveiled its own version not long after Spotify.
“[Marquee] pushes streams in a way that you haven’t been able to with Spotify ads to date,” one digital marketer says.
But earlier this year, YouTube tweaked the way it counts purchased views, concerned that the platform’s “credibility” was being partially undermined by pay-for-view behavior. “Video advertising is an effective way to reach specific audiences with a song debut,” YouTube wrote in a blog post, “but paid advertising views on YouTube will no longer be considered when looking at a 24-hour record debut.”
Marquee requires a user click-through in a way that YouTube’s tool does not. Still, Spotify’s program seems ripe for similar abuses. That’s because stream counts on Spotify are public, just as they are on YouTube, and in a data-obsessed world, those numbers are cited frequently as evidence of success — in internal label meetings, radio campaigns, and press releases (and in publications like Rolling Stone).
As the numbers on a single mount, so does the implicit pressure to listen; surely millions of streamers can’t be wrong. In this way, popularity begets popularity, even if streams came from $5,000 ad-buys. To an outsider looking at Spotify, those streams will be indistinguishable from any other kind.
Lamb reiterates, “It’s not as though you give us money and we make streams happen.” But that’s probably the way labels will try to use Marquee. “This pushes streams in a way that you haven’t been able to with Spotify ads to date,” the digital marketer says. “Everyone’s going to test it.”