How did Spotify get all the music?

Question

It seems that pretty much all music with any amount of popularity (at least here in the West) is available to be played on Spotify, unless someone has explicitly removed their songs - but notable examples of this (like Neil Young, famously) seem few and far between. This is despite numerous complaints from artists that they get paid a pittance even if their songs are played millions of times.

How is this possible? It seems like a bit of work and cost to acquire the rights to play even a single song in public - say in at a big event or in a movie. So I can't quite wrap my head around how they managed to convince all record labels and artists to allow their music to be played at will for such a tiny price!

Even if they did deals with some of the more popular artists to get them on board to convince others, one would imagine it would end up more like Netflix, etc. (i.e. a lot but not everything).

Was it just that they (the artists & labels) felt that they would earn even less money because of piracy if they continued to try and sell CDs, or sell their music online?

Answer 1

Piracy was happening long before streaming. First came MP3s, and by the time Spotify came along in 2006 CD sales were already in major decline. It's no different from terrestrial radio. Spotify is by no means profiting off of free music. They make money from advertising or subscriptions. They pay a lot of money to the labels. As long as they don't claim ownership.

In 2021 Spotify paid $7 billion in royalties to the labels. It's a 70/30 deal between Spotify and the labels; Spotify getting the latter. The problem is that Spotify has more or less a monopoly on free streaming. The alternative was Napster and no one making any money, so the labels decided that something was better than nothing, at the expense of artist revenue.

The trick is diversifying the markets. Netflix controlled 100% of the market on movie streaming, but eventually, the studios themselves created their own streaming platforms. There is speculation that the music labels will eventually create new platforms just as Paramount and Disney have, and when and if that ever happens they will start pulling content.