Spotify's Profit-Driven Model Devalues Artists and Homogenizes Music

Tech Won't Save Us · January 01, 2026 · Listen to Original Episode →

Original Title: How Spotify Remade the Music Industry w/ Liz Pelly [Replay]

TL;DR

Spotify's initial strategy prioritized user experience and ad-based revenue, mirroring piracy's ease, rather than a deep commitment to music, enabling its growth into a dominant platform.
Major record labels leverage their vast back catalogs to secure outsized negotiating power with streaming services, dictating contract terms and profiting disproportionately from the model.
The shift to "lean-back" listening, driven by algorithmic playlists and mood-based curation, prioritizes user engagement and platform profitability over active music discovery and artist connection.
Algorithmic recommendation systems, including "Daily Mix" and "AI DJ," are influenced by commercial deals, potentially limiting exposure for artists not participating in paid promotion schemes.
The proposed "user-centric" royalty model offers a more transparent and equitable distribution of streaming revenue, directly linking listener payments to the artists they stream.
Universal Music Group's proposed royalty model, which demonetizes tracks under 1,000 streams and categorizes certain sounds as "non-music," risks marginalizing niche artists and devaluing diverse audio content.
Public libraries are emerging as alternative models for music consumption, offering direct licensing to local artists and fostering community-driven digital public spaces that re-evaluate music's societal value.

Deep Dive

Spotify's business model, initially appearing as a democratizing force in music consumption, has fundamentally reshaped the industry by prioritizing engagement and profit over artist compensation and genuine musical discovery. This has led to a system where algorithmic curation and "lean-back" listening experiences, while profitable for the platform, devalue artists and homogenize musical culture, creating a concerning precedent for the integration of generative AI and further entrenching corporate control over creative expression.

The evolution of Spotify from its origins in Sweden, a market with a unique cultural climate around file-sharing, reveals a strategic pivot from an advertiser-funded model to a subscription-based one driven by negotiations with major labels. These negotiations granted significant leverage to rights holders like Universal, Sony, and Warner, allowing them to secure favorable terms, equity stakes, and minimum rates that have disproportionately benefited them even as many musicians struggle with meager royalties. The company's subsequent focus on playlists, particularly mood-based ones, was a deliberate growth tactic to foster "lean-back" listening--an experience where users passively consume music rather than actively discovering it. This shift, driven by a need to boost engagement metrics and reduce subscriber churn, has led to music being selected and promoted based on profitability and algorithmic prediction rather than artistic merit or cultural significance.

The implications of this model are far-reaching. The emphasis on algorithmic recommendation, exemplified by features like "Daily Mix" and "AI DJ," increasingly dictates what listeners hear, often prioritizing music that has been commercially promoted through "discovery mode" where artists accept lower royalty rates for algorithmic placement. This creates a closed loop where popular music becomes more popular, potentially marginalizing artists who do not participate in these promotional schemes. Furthermore, the recent shift towards "artist-centric" royalty models, championed by Universal Music Group, while presented as a solution to combat fraud, risks further disenfranchising amateur artists and those creating non-traditional music like field recordings by setting arbitrary stream thresholds for payment. This contrasts sharply with the "user-centric" model proposed by musicians and advocacy groups, which would direct a listener's subscription fee directly to the artists they actually stream, offering greater transparency and a more equitable distribution of revenue.

Beyond corporate initiatives, a growing movement of musicians and advocates is pushing for systemic change. The emergence of a new music labor movement, characterized by solidarity organizations and legislative efforts like the "Living Wage for Musicians Act," signals a desire to reclaim power from platforms and labels. These efforts aim to secure direct payments to musicians and establish a more sustainable ecosystem. Simultaneously, initiatives like local public library streaming projects offer a compelling alternative by demonstrating how music can be valued and distributed differently. These projects, which license music directly from artists for local collections and digital public spaces, re-center the relationship between listener and musician around community and cultural value rather than pure profit, suggesting that technology, when built with different values, can foster genuine connection and support for creators.

Action Items

Audit Spotify's playlist curation: Identify 3 algorithmic biases that disadvantage independent artists and propose mitigation strategies.
Draft runbook for music discovery: Define 5 steps for users to actively find new music beyond algorithmic recommendations (ref: lean-forward listening).
Measure impact of user-centric royalties: For 3-5 hypothetical artists, calculate potential income increase under a user-centric model versus current pro-rata system.
Evaluate library streaming initiatives: Identify 2-3 successful local library music projects and document their community engagement strategies.

Key Quotes

"it's very risky when we start letting companies like universal music group and these big tech companies be determining like who is a serious artist and who is an unprofessional hobbyist who doesn't deserve to make like any royalties at all for their work these are really slippery slopes i think"

Liz Pelly argues that allowing major corporations and tech companies to define what constitutes a "serious artist" is a dangerous precedent. This power dynamic risks devaluing artists who do not fit a corporate mold, potentially excluding them from earning royalties for their work. Pelly views this as a precarious situation with significant negative implications for the music industry.

"The CEO of Suno AI said people “don’t enjoy” making music. ... it's like yes like learning to play music does requires like having to want to learn how to play music or you don't learn and you make music and with a few simple chords and that's what's beautiful about like folk music and punk and like minimal music and like you know like it's just so like out of touch from what art is"

Liz Pelly strongly refutes the notion that people do not enjoy making music, as suggested by the CEO of Suno AI. Pelly highlights that the beauty of music creation lies in the desire to learn and express oneself, even with simple means, citing folk, punk, and minimal music as examples. She criticizes the CEO's statement as being out of touch with the fundamental nature of artistic creation.

"The conquest of chill reflects an industry content to profit from a world of disconnection"

Liz Pelly posits that the rise of "chill" playlists and mood-based music curation reflects an industry that benefits from societal disconnection. This approach, she suggests, prioritizes passive consumption over meaningful engagement with music and artists. Pelly implies that this profit-driven strategy thrives on isolating listeners rather than fostering genuine connections.

"The AI DJ is sort of like part the the culmination of something that Spotify has been after for a while which you know if you look back over the past decade interviews with executives for a really long time they've been after this thing where they want someone to be able to open the app and just hit a play button"

Liz Pelly explains that Spotify's development of AI DJ represents a long-standing goal of the company to create a "self-driving music" experience. This initiative aims to allow users to simply open the app and press play, indicating a move towards automated music discovery and playback. Pelly suggests this reflects a desire to simplify the listening process to its most basic, one-button function.

"The model that artists and unions and advocacy groups try to put together it's called user centric where instead of this like really complicated system that is so confusing that most musicians actually struggle to understand and most listeners if you ask probably would have no idea what any of this is user centric instead would just say like i am a spotify user i pay 10 a month spotify gets a 30 cut which like you know they -- have since the beginning and then the other 70 goes to the artists that i stream"

Liz Pelly contrasts the current "pro rata" royalty system with the proposed "user-centric" model. Pelly explains that the user-centric model would simplify royalty distribution by allocating a user's subscription fee directly to the artists they stream. This, she argues, would be more understandable for both musicians and listeners, unlike the current complex and opaque system.

"The library streaming projects are really interesting to me for a bunch of reasons one of them is because like mentioned earlier and i'm sure so many people who come on your show say you know when you're criticizing technology or when you're writing about technology you're rarely ever actually talking about the technology itself and oftentimes what's being critiqued is power or what's being critiqued is capitalism or industry or corporate consolidation or just really you know putting profit over people you know like these are the things that you're criticizing"

Liz Pelly highlights that critiques of technology often address underlying issues of power, capitalism, and corporate consolidation rather than the technology itself. She uses library streaming projects as an example of how technology can be implemented differently when built with community needs in mind. Pelly suggests these projects demonstrate that technology's impact is shaped by the values and intentions behind its creation and deployment.

Resources

External Resources

Books

"Mood Machine" by Liz Pelly - Mentioned as the author's new book about Spotify and streaming music.
"The People's Platform" by Astra Taylor - Mentioned as a book that significantly impacted the author's thinking about the internet's democratization of culture.
"Spotify Takedown" by Rasmus Fleischer - Mentioned in relation to the author's research into Spotify's history and the context of piracy in Sweden.

Articles & Papers

"Penny Fractions" (Newsletter) - Mentioned as a newsletter by David Turner that critically covers the streaming ecosystem.

People

Liz Pelly - Music journalist and author of "Mood Machine."
Astra Taylor - Author of "The People's Platform," previously interviewed on the show.
David Turner - Author of the newsletter "Penny Fractions."
Rasmus Fleischer - Co-author of "Spotify Takedown" and founding member of Piratbyrån.
Daniel Ek - Co-founder of Spotify, mentioned as a major investor in military AI drones.
Martin Lorentsson - Co-founder of Spotify, with a background in the advertising industry.
Gustav Söderström - Spotify's co-president, discussed for his views on AI and the company's product strategy.
Rashida Tlaib - Congresswoman working on the "Living Wage for Musicians Act."

Organizations & Institutions

Spotify - Streaming service discussed for its impact on the music industry, artist compensation, and listening habits.
Universal Music Group - Major record label mentioned in relation to its influence on streaming models and artist categorization.
Sony - Major record label mentioned in relation to its contracts with Spotify.
Warner Bros. Discovery - Mentioned in the context of potential acquisition by Netflix and broader trends in media consolidation.
The Nation Magazine - Partner in the production of the "Tech Won't Save Us" podcast.
Piratbyrån (Bureau of Piracy) - Organization formed in response to anti-piracy efforts, advocating for file-sharing.
Anti-Piratbyrån (Anti-Piracy Bureau) - Hollywood lobbying group.
Merlin - Industry trade organization representing independent labels in negotiations with streaming services.
DistroKid - Distribution company for independent music.
TuneCore - Distribution company for independent music.
United Musicians and Allied Workers (UMAW) - Organization advocating for musicians' rights, involved in campaigns and legislative efforts.
Smithsonian Folkways - Record label mentioned for its work with field recordings and nature recordings.
Edmonton Public Library - Library mentioned for its local music streaming projects.

Websites & Online Resources

Patreon.com/techwontsaveus - Website for supporting the "Tech Won't Save Us" podcast.
The Pirate Bay - File-sharing website mentioned as a competitor to early Spotify in Sweden.
WFMU - Freeform community radio station in New York City, mentioned for its active online community.
Suno - Generative AI music company, mentioned for its CEO's comments on music creation.

Other Resources

Mood Machine - Concept referring to playlists designed around specific moods, discussed as a streaming era phenomenon.
Pro Rata Model - Current system for calculating streaming royalties based on market share.
User-Centric Streaming Model - Proposed royalty system where listener payments go directly to the artists they stream.
Artist-Centric Streaming - A proposed change to the streaming model, advanced by Universal Music Group, that demonetizes certain content and sets a minimum stream threshold.
Daily Mix - Spotify feature that provides personalized music mixes based on listening history.
Discovery Mode - Spotify feature where musicians can accept lower royalty rates for algorithmic promotion.
AI DJ - Spotify feature that uses generative AI to create a personalized DJ experience.
Living Wage for Musicians Act - Proposed legislation aimed at ensuring musicians receive direct payment.
Hoopla - Digital media service offered by libraries, similar to a library version of Spotify.
Local Music Streaming Projects - Initiatives by public libraries to create digital collections of local music.