3 things to know about Spotify’s controversial new ‘pay for influence’ tool, Discovery Mode

Picture credit: Fabio Alves

On Monday (November 2), Spotify revealed that it would soon be testing a controversial new tool called ‘Discovery Mode’ that will allow artists and record labels to influence the songs selected by its algorithm for personalized recommendations.

‘Discovery Mode’ works by letting a label or artist identify a track that they want prioritized, with that track then played in listeners’ personalized Auto play or Radio feeds.

Artists and labels aren’t required to pay anything up front for this, but by opting in, they agree to being paid a lower recording royalty rate for streams in those personalized sessions (in Radio and Autoplay).

They can opt out, and when they do, the track will continue to be played in Radio and Autoplay, but it won’t be prioritized and they will then get the standard recording royalty rate for those streams.

An announcement suggesting that artists can choose to be paid less per stream for their tracks to be played in personalized feeds couldn’t have come at a worse time for SPOT in terms of its reputation amongst the wider artist community.

Just last week, Spotify was issued with an open letter from the Union of Musicians and Allied Workers demanding better payment and claiming that the streaming platform “encourages labels and management companies to pay for plays on the platform”.

“The practice amounts to payola,” added the letter. “It is unacceptable and must be stopped.”

Unsurprisingly, Discovery Mode immediately drew criticism from artists. David Lowery, for example, suggested via a tweet that “This a form of payola or sponsored social media post. It is not necessarily illegal but the tracks would need to be labeled”.

So is Discovery Mode a form of payola, or merely a way to “give artists a say in how their music is discovered?”.

Here are three things you should know about the new service…

1) Spotify already drives 16 billion artist discoveries every month… and it says that artists should get a say in what fans are discovering.

Spotify claims that it drives 16 billion artist discoveries every month.

As the company explained in its blog post announcing Discovery Mode, this means that 16bn times a month, Spotify’s 320 million monthly users will hear an artist they have never heard before on Spotify.

The blog post adds that Spotify is “actively refining [its] algorithms to enable even more fan discoveries of new artists each month”

We already knew this of course, after discovering that Spotify has conducted research around tracking its listeners personalities for personalization purposes. It was even granted a US patent for just this kind of technology last month.

“[Artists] should be in charge of what their success look like on Spotify so they can be in control of their careers, so we created an opportunity within our personalized recommendation.”

Charleton Lamb, Spotify

But now, according to Spotify, artists should also get a say in the selection of songs made by its algorithm for personalized listening sessions.

Speaking to MBW on Monday, Spotify Product Marketing Lead Charleton Lamb, said: “We speak to artists all the time, and they tell us that they want more opportunities to connect with their fans, even outside of release week and especially with their catalog music.”

“[Artists] should be in charge of what their success look like on Spotify so they can be in control of their careers, so we created an opportunity within our personalized recommendation. Spotify recommendations are great, and a part of what make Spotify great, because we’re taking into account thousands of signals, [like] what you’re listening to, [and] when, what songs they’re adding to playlists.

He added: “All these signals create a bespoke listening experience for each and every fan. Our algorithms are focused, they’re accurate, but recommending music shouldn’t just be about what our algorithm thinks you want to listen to. With this tool, we’re going to make artists a bigger part or recommendation.

“They might be thinking more strategically about an album anniversary, or if they’re seeing viral cultural moments take off but they want to capitalise on, on Spotify. Or any other kind of marketing strategy that they might work on with their team. So it’s going to put more control in the hands of artists and labels.”

2. it’s going to cost artists and labels in royalties – but Spotify says they could see “positive ROI”…

Spotify explained in its blog post that Discovery Mode ‘won’t require any upfront budget’ and instead, labels and rightsholders will need to agree to being paid a lower recording royalty rate for songs flagged to be played in personalized sessions .

Spotify’s Lamb told MBW that the reason for that was because the company “wanted to make sure that the tool is accessible to artists of any size, at any stage of their career”.

“We’re not asking for any upfront budget or payment, which means there’s no barrier to entry,” he added. “We were looking for a model that would be more accessible, democratic and fair, so we’re not going to ask any artists to spend any cash.”

Spotify couldn’t ask artists or labels to spend cash on promoting tracks upfront: firstly, that would draw accusations of out-and out payola; secondly, playing paid-for content to Premium subscribers would defy Spotify’s own Premium subscriber pledge of ‘no ad interruptions’.

Spotify stresses that the promotional recording royalty rate will only be paid for streams in Radio and Autoplay, the places where Spotify is providing its Discovery Mode service, and that streams outside of these formats will be unaffected.

“If the track is performing well, rightsholders can see positive ROI, and if they don’t, they can just turn it off and go back to normal.”

MBW asked Spotify’s Lamb how the promotional recording rate has been calculated. He told us that “it’s something we’re still working on in testing, but our goal and our intention is for artists and labels to be able to earn positive ROI by using the tool”.

Added Lamb: “If the track is performing well, rightsholders can see positive ROI, and if they don’t, they can just turn it off and go back to normal. [It’s a] model that allows the smallest artist [to act], on the same terms as a big label, subject to how listeners are responding.”

The investment to which he’s referring, of course, is the lower recording royalty rate payment per stream. The ‘return’ is the potential for that prioritized track to be listened to outside of Radio or Autoplay, where it will then earn a standard recording royalty rate per stream.

“Listener satisfaction is the most important thing. It’s really what matters here. And we’re only ever going to recommend content that listeners want to hear,” Lamb continued.

“If songs don’t perform well, they will quickly automatically pull back. Because of that, we don’t guarantee placement to labels the artists and we’re only ever going to recommend stuff that we think a particular listener might want to hear.”

Lamb also said that Spotify plans to “calibrate [the service] to make sure that the widest group of artists and labels are going to be able to find success”.

3) The Discovery Mode experiment is starting with Radio and Autoplay – but could expand to other areas on Spotify…

Spotify states that, while it will initially only focus on applying recommendations via Discovery Mode to Radio and Autoplay, it will “carefully test expanding to other personalized areas of Spotify” as it learns from “this experiment”.

The reason for choosing these two areas initially, explained Lamb, is because they are “where listeners are really interested in discovery”.

He added: “Those are the places listeners are going to. They want to hear music that sounds like the stuff they like only different and that’s where we’re driving a lot of that activity. We thought that would be a really good place for us to start to increase the chances of that kind of discovery happening.”

Spotify hasn’t specified the exact other areas where Discovery Mode might be tested in next. But if, for argument’s sake, it was Spotify’s personalized Made for You playlists, questions could be raised about how ethical it was to allow a large record label that can afford to pay a lower recording royalty rate to influence what goes into these playlists. And whether those record labels were effectively paying to gain market share.

“Right now, we’re not offering a targeting component to to the [Discovery Mode] tool.”

Lamb insisted that labels won’t be able to target listeners based on things like preferred genre, tempo or any other listening data. “Right now, we’re not offering a targeting component to to the tool,” he says. “That would all be handled automatically by how the algorithm optimises for our listeners.”

Additionally, Discovery Mode is notably referred to as a ‘test’ and an ‘experiment’, but Spotify’s blog post doesn’t specify when it will be launched as a permanent tool for artists and labels to use.

When we spoke to Lamb, he explained that Spotify will “look at the data” to determine that. “We’re starting this small just to be careful and make sure that we are able to deliver this great experience for listeners and artists and labels,” he said.

“We’re starting with just a few key partners right now. But as we’ve done with our other tools, it’s our intention to make available every artist and label and we will do that as soon as we are able to do so responsibly.”Music Business Worldwide

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