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The Spotify Business Model

Liam Curley
Liam Curley
5 min read
The Spotify Business Model

In 1982, Blondie would go on tour to sell a record. In 2022, Drake will make a record to sell a tour.

The music industry has changed, and the business model has flipped. Some of that is to do with how you consume music. The mass-market used to buy vinyl, then cassettes, then CDs. That makes a difference. If you can touch the product, you feel a sense of ownership, and a sense of ownership increases the value you place on an object. [1]

As music shifted to digital, the value you placed on it diminished because there was no tangible object in the palm of your hand. On iTunes, you paid for digital music. But now, we're in the Spotify age of [practically] free streaming. It's a similar situation for film.

The majority of artists have accepted this fact. Whilst Taylor Swift fights Spotify for a greater slice of the pie, Ed Sheeran celebrates that he could never have filled a sold-out Wembley gig without free streaming.[2]

The model will shake up your industry

The model will shake up your industry

The market is changing. Content marketing is widespread. Even the most traditional business people know that blogs and social media are important tools in modern business development. What they haven't grasped is the Spotify model.

The model for a service business looks like this:

  • You put ALL of your best work into the world for free. Your ideas, tactics, even your systems.
  • The world starts to learn about what you do. They read, listen, and share.
  • That builds an audience. At least 99% of your audience will never buy your service.
  • The minority remaining are in the market to pay a high fee for one to one consulting. They pick you because you've proven your credentials when they need your service. You're 'famous', which gives you authority, and through your consistent publications of expertise, they want you to deliver it directly.

Many marketers and entrepreneurs embrace' content marketing but don't buy into this Spotify model. They produce 'goodish' content and hold back the best stuff for fear that nobody will need to hire them anymore if they give it away. That doesn't work.

Imagine if Drake decided, "I'll save my five best tracks for concerts. Nobody will bother paying for the gig if I release them on Spotify because they can hear my best work for free."

Most people will never buy from you, so giving them your expertise for free has zero impact on you. Of the people that would buy your service, they don't want to do the work for you. An in-house marketer doesn't want to do SEO. If a specialist firm delivered the instructions on how to grow organic traffic, the in-house marketer wouldn't have the time to execute. Plus, there is no substitute for experience. Even if you are told how to build inbound SEO links, you won't be as effective as someone who has been doing it for ten years.

Big winners

Big winners and losers

The introduction of mass media transforms industries. In the 1800s, musicians and singers could make a decent living performing in local venues. There was little form of alternative entertainment.

Once the phonograph/gramophone hit the mass market, artists like Enrico Caruso [3] became rich and famous. Now, one person could reach and sell records to hundreds of thousands. You weren't limited to a few hundred at your local venue. As a result, there was less incentive for the market to visit local venues, as they could listen to the best musicians in the world from the comfort of their own home. So, less work and money for the majority of musicians.

Spotify and streaming have done something similar. We can listen to any song, at any time, for free. There's little incentive to buy music. But, there's more incentive than ever to go and watch our favourite musicians live.

The same is happening in your industry. There's a wealth of free information out there. You can learn how to do anything, for free, on your laptop. That naturally means that the market for any service is shrinking, as many startups will save money on a consultant and do the work themselves. But, those giving out the free information have the chance to become niche famous, and with that comes the prime consulting opportunities.

Examples of the Spotify Model in practice

Customer Camp

Customer Camp

Katelyn Bourgoin creates content around customer psychology. Want to learn 'Why We Buy'? Subscribe to her newsletter. Want Katelyn to figure it out for you? Her business, Customer Camp, sells customer research services and workshops.

Aleyda Solis

Aleyda Solis

THE international SEO expert. For years, Aleyda has been putting out content on how to grow organic reach internationally. Who are you going to turn to when you work for a multinational e-commerce brand and need to improve traffic?

Beyond your Hammock

Beyond your Hammock

A financial planning company with a high profile blog on wealth management featured in several national media outlets. Free blog, paid one-to-one planning.

Brianne Fleming

Brianne Fleming

Brand marketing. Brianne has a podcast and blog and a strong following on Twitter and LinkedIn. She offers consulting to make your brand 'pop.'

Klowt

Klowt

A personal branding agency run by Amelia Sordell. A specific niche for 'people, not businesses.'

Shay Rowbottom

Shay Rowbottom

An influencer agency for LinkedIn. You already  have a following on other platforms. Shay helps you transfer that to LinkedIn. So, she creates fantastic content on how to grow on...LinkedIn.

You next?


[1] Research conducted by Atasoy and Morewedge in Digital Goods Are Valued Less Than Physical Goods, Journal of Consumer Research

[2] BBC

[3] EMI Archive