How Spotify Engineered the New Music Economy

Steve Cooper didn't expect much from Spotify.

When the New York-based band Spirit Animal released "The Black Jack White" last spring, the band's frontman didn't have high hopes about the streaming music service. He loves the platform and subscribes to it but didn't think Spotify would help his band this early in its career.

But out of nowhere, Sean Parker, Napster's infamous cofounder and early Spotify investor, added the funk-rock group's single to his trendy "Hipster International" playlist. More than 880,000 fans follow the near-200 song collection, which includes established acts like The Black Keys and Phoenix alongside up-and-coming artists. For an emerging group with only 6,776 Facebook fans and 1,588 Twitter followers, the surprising exposure gave Spirit Animal an unanticipated boost. The frontman says the playlist inclusion had a similar effect to a DJ playing a radio single.

"[It] worked wonders for us," Cooper tells Mashable. "The Spotify plays have resulted in new fans and interest in the band. From a personal standpoint, I've had the pleasure of hearing our song blaring from a bar across from my apartment, unprompted."

Spotify users have streamed "The Black Jack White" more than 450,000 times since Parker laid ears on the tune. As a result, Spirit Animal has received unexpected royalties. The band's not getting rich or making a living off the cash. But the members have noticed a tangible impact: touring costs.

"If things keep pace as they have this summer, our 2013 Spotify streams could pay for as many as 12 monthly payments on our new tour van," Cooper says about the group's 2008 Chevrolet Express 1500. "It's cool when you see that volume translate to dough."

Spirit Animal's Spotify plays have triggered a noticeable uptick in digital music sales. But for the most part, guitarist Cal Stamp thinks the sheer number of Spotify streams, despite producing far less revenue per listen, has comparatively dwarfed the band's iTunes revenues. It's also helped convince online listeners to attend in-person shows. People sing along and know the accompanying dance from the single's video.

Nevertheless, the band thinks it still needs to take other traditional steps to ensure that Kingdom Phylum, its latest self-released EP, finds success. At this point, they think that goal requires far more than just the digital platform. But it's a start.

"I don't know if [Spotify's] a game-changer," Stamp tells Mashable. "It's definitely helpful. It's a tool in the box of tools."

Spotify hopes more artists see rewards from working with the streaming service. During a SXSW 2013 keynote interview, cofounder and CEO Daniel Ek outlined his master plan to accomplish the company's goals. He painted an ambitious vision for his digital platform, which at the time boasted 24 million worldwide total users and 6 million paid subscribers.

"My goal is to not just convert the 24 million into buying [a subscription]," Ek told the L.A. Times. "My goal is to get 1 billion using streaming services rather than a piracy service."

Unlike many music industry personnel, who are based in a field known more for reaping profits than rewarding artists, Ek's remarks stood out for his aim to champion artist interests. He proclaimed that part of his company's mission, which, unlike Apple or Google is able to keep its undivided attention on music-related issues, is to pay musicians their fair share down the road.

"I want to get back to the time when artists can create a piece of music for five years without worrying about how to pay rent," he told the Hollywood Reporter.

In many ways, Ek bears the torch for a company some think could revitalize the music industry. Spotify so far has poured $500 million back into the pockets of artists, labels and publishers. It's also promised to double those payments by the year's end and has suggested the figure could skyrocket in subsequent years as it continues to grow its user base and help curb piracy.

If Spotify, once referred to by Businessweek as "music's last best hope," can deliver on those promises, the Swedish streaming platform could save a dying industry. To help artists pay their bills, the company needs to attract more paying subscribers to use its online music service. That means steering folks away from current competitors Pandora, Rdio, MOG and Deezer. It'll also have to fend off recent launches of Apple's iTunes Radio and Google Play Music All Access. With that much competition, not everyone's convinced Spotify can successfully hit its lofty goals.

Spotify today is both a beacon of hope and a lightning rod for the music industry. As the company celebrates five years since it publicly launched its streaming service, the disruptive service stands at a crossroad. It could either revolutionize how listeners consume music on a global scale or fall by the wayside. Much of its future success hinges on a simple question: Is Spotify a savior or villain for musicians?

Image: Louis Lanzano/ Bloomberg via Getty Images

In April 2006, Daniel Ek founded Spotify with Martin Lorentzon, a fellow Swedish entrepreneur who started the Internet marketing firm TradeDoubler, which had purchased one of Ek's early startups. Before the two businessmen met, Ek had led numerous other tech ventures, including BitTorrent client ?Torrent and interactive browser game Stardoll.

Together, the technologists wanted Spotify to accomplish a simple goal: create an online platform that gave listeners access to a vast music catalog. They hoped to improve upon Napster's model and create a legal alternative to piracy that both consumers and the industry considered legitimate.

Spotify first offered its services on Oct. 7, 2008, to select users in Scandinavian countries, the UK, France and Spain. After initially growing its user base across a handful of European countries, Spotify launched to American users in July 2011 following sluggish negotiations with major and independent record labels.

The now London-based company has expanded to four different continents and reached more than 26 million users, including 6 million paying subscribers. According to Chief Marketing and Revenue Officer Jeff Levick, Spotify access reaches 32 countries, including recent launches in Argentina, Greece, Taiwan and Turkey. The 42-year-old marketing head, a former Google and AOL exec who joined the company soon after its U.S. launch, has witnessed the company's transformation into a global music platform.

At the moment, Spotify currently employs more than 900 workers, up from 300 in 2011. Levick works out of the company's New York office and calls it the most collaborative work environment he's ever experienced. The company's second largest workspace has an open floor plan, synced Sonos speakers and exclusive in-office concerts. Many of its Chelsea-based employees, the exec tells Mashable, make collaborative playlists with one another and occasionally hold Friday jam sessions on a stage back-lined with musical equipment.

"We're obsessed with music and we're obsessed with the industry," says Levick. "Everyone comes to work every single day trying to make music a better experience for consumers, a better experience for artists, and to bring music and access to music to every single person on the planet."

Levick says the average listener spends an estimated 110 minutes each day on the platform. Unlike radio, which traditionally plays in the background without much engagement, aside from the occasional dial turn, Spotify users actively listen. They search for specific artists, discover new bands, share playlists and send friends music recommendations.

"If you mention any music to [users], it's two keystrokes and they're looking at it," says Mike Doughty, a New York-based singer-songwriter and Soul Coughing's former frontman. "From early Judas Priest to my weird electronic album that I put out 30 years ago, it's all right there."

For Chief Content Officer Ken Parks, 49, who oversees Spotify's licensing agreements in the U.S., the service has transformed his relationship to music. "I used to go to the store, buy something, bring it home, unwrap it," Parks tells Mashable. "I don't have to do that anymore."

Parks has used Spotify to rediscover old personal favorites like Brian Eno through its mammoth library. The platform has also helped him receive a crash course from his son about hip hop. They create collaborative playlists together, which he says has expanded his musical horizons to include rappers such as Kendrick Lamar, A$AP Rocky and 2 Chainz, with relative ease and minimal costs.

Even some of Spotify's largest critics grasp the platform's immense value and enjoy the user experience. Galaxie 500 drummer Damon Krukowski, an outspoken artist who's opposed the service's small and controversial payments, appreciates its deep catalog. He's a premium subscriber, which offers him the chance to hear more than 20 million songs, including a treasure trove of rare 1950s Catalonian music. Before Spotify, he had searched far and wide for select records, but even failed to find what he was looking for in Spain. Spotify allowed him to discover a vast collection of albums from that era. He cherishes that access.

"I'm not just a naysayer about [Spotify's artist payments]," Krukowski explains. "As a consumer, I think it's incredible. It allows an access to music that I cannot find elsewhere. That, to me, is really precious."

Image: Spotify

It's that kind of unprecedented access that has helped the company become a disruptive service. Levick thinks the company has just scratched the surface in terms of its international expansion, particularly as users begin to value access to the celestial jukebox more than the ownership of physical records, CDs or MP3s. Spotify and other digital services are tasked with shifting listeners' consumption patterns, which is no small undertaking.

Despite the challenges, Levick insists the access-based model is a superior one. "You can listen to small amount of music over and over again that you purchased, or you can have an infinite amount of music selection and access," he says.

From those who intuitively grasp the service, he repeatedly hears one message loud and clear: "Spotify has changed my relationship with music."

One of Spotify's most promising signs is its growing number of paying subscribers between the ages of 18 and 24, which spokesman Graham James calls the company's core demographic (Spotify declined to elaborate). Parks, who worked for EMI Music for more than three years, remembers how much of the industry's old guard assumed young adults were no longer willing to purchase records, given how free music has become available in the post-Napster era. Spotify, he says, has defied those expectations.

"You can't put the genie back in the bottle," Parks says. "The industry has learned a lot from the experiences of the last decade. Spotify's model is very different. We've monetized users and usage, rather than selling the units of music. It challenges a lot of the assumptions people have had in the business."

Cellist Nick Ogawa, who currently performs under the name Takénobu, has witnessed how Spotify has re-engaged fans once unwilling to pay for music. The Atlanta-based artist makes much of his income through digital services, namely iTunes sales driven through people who first streamed his songs on Pandora and Spotify. It pays his rent.

Ogawa thinks Spotify has triggered an important shift in the way people listen to music. That's a monumental change as once-reluctant listeners have opened their pockets to the subscription service.

"Spotify is really the replacement of illegal downloads," Ogawa tells Mashable. "I have friends who swore that they would never buy music again, basically since Napster happened. But once there was a streaming service that had everything available for $10 a month, they were like, 'Okay, I will begin paying for music again.'"

According to Parks, Spotify's growing user base has translated into millions of dollars without cannibalizing the pre-existing revenue streams that have traditionally bolstered artist and label incomes. As more skeptics figure out Spotify's benefits and overcome their resistance to technological advances throughout the music industry, he thinks they'll embrace the service.

"For a long time, the music business was focused on trying to wring more out of the existing people who still have memory of ever buying music," Parks says. "When you look at the rest of the world, there's a ton of consumption, maybe a billion people online consuming a lot of music without paying for it and without being monetized at all. We're just getting started."

Image: Flickr, Jon Åslund

Despite the encouraging signs, ones reflected in Spotify's recent $3 billion valuation from investors, the company hasn't turned a profit since it first launched the service five years ago. Spotify reported revenues of $578 million in 2012, up 128% from the prior year, but its losses also swelled from $60 million to $78 million.

Spotify declined to discuss specifics regarding its financial standing in 2013 to date. Levick says the company stands "significantly ahead" of where it was at this point last year. Since approximately 70% of its revenue gets paid back to rights holders, he says the digital platform is forced to make a tough decision between focusing on growth and profit. For now, the company will emphasize global expansion.

"It's more important to take that money and reinvest it into new markets, versus putting it back into this being a small service in a small number of places," Levick says. "Our investors are behind that, our board is behind that and our consumers are behind that."

Beyond its worldwide expansion, Spotify is focusing on improving service so it remains enjoyable for consumers, brand partners and advertisers. The company has taken enormous steps to ensure it's not just a listening experience, but a social one too. It's allowed users to make collaborative playlists, view friends' music tastes and follow favorite artists. Spotify has also partnered with hardware companies, including automobile manufacturers and high-end electronic brands, to bundle the software with their products. With one of its latest announcements, Spotify Connect, it's attempting to let listeners switch devices and move across different environments in a seamless manner.

Spotify, perhaps more than any other digital music service, is convincing listeners to not just use the platform, but fully engage with it. That level of interaction has led to lucrative partnerships with companies such as Advanced Auto Parts and Trojan, whose advertisements blare between songs on the free version. That's allowed the tech startup to keep its services available to non-paying subscribers. Brands like Coca-Cola and Reebok have partnered with Spotify, too, co-branding their own respective location-based and workout apps. Needless to say, behemoth social networking site Facebook integrated with Spotify early on.

The combination of all those moving parts, Parks says, has helped labels and artists swallow the pill and give up some control of their catalogs. "It's been embraced by rights holders," he says. "It ultimately benefits everybody involved in making music."

Those rights holders, including the three major record companies and some independent labels, are largely supportive of Spotify's impact because they've reportedly received equity in the streaming service. It's an oft-overlooked piece of the equation, but it's ultimately how Spotify convinced labels to work with its platform.

"[Spotify is] giving up a small piece of the business, but a piece nonetheless, in exchange for the access to these catalogs," explains David Macias, president of Thirty Tigers, an independent Nashville-based label that works with Trampled By Turtles, Jason Isbell and numerous other acts. "If you're Sony or Universal, then you're like, 'Okay, nobody's given me that before. Everybody wants our catalog and under these terms, but nobody's ever offered us a small piece of equity.'"

Image: Flickr, Birkinbine

"If Spotify ever goes public, they could make a lot of money," Camper Van Beethoven and Cracker frontman David Lowery (above) tells Mashable. "They [would've done] that by pimping our songs out, our recordings. Where's our share when the IPO comes? Where's our share of money?"

Musicians typically earn varying mechanical royalties based on whether they own a composition (as either a songwriter or publisher) and for the recorded performance of a song. But they're unlikely to profit from the label's speculative play with Spotify, in which the those institutions traded short-term access for long-term assets. If the tech startup goes public, which many observers suspect will happen, those labels stand to make a fair share of money. Artists won't.

Levick says Spotify shouldn't determine how money goes back to artists during the creative process. While the company is more than happy to educate musicians on how to use the service to connect with listeners, it won't meddle with the intricate relationships between labels and songwriters.

"It's not our goal to mediate payments between artists and labels," Levick says. That's a business [in which] we have zero expertise … How the payments and the entitlements down the chain get sorted, I think that's for the music industry to [decide]. We're focused on being the best platform for listening."

Certain artists find that stance hypocritical. Doughty thinks Spotify's position casts doubts on its promises to help musicians pay the rent. While he sees value in the service, he recognizes that, no matter the promises, the company is still a self-interested corporation with a bottom line. He thinks it's unlikely the company will fully change its tune and become a benevolent entity.

"[They're not] going to suddenly turn around and say, 'Well, we're making enough money. Where we can spread the wealth?'" he says.

The way Krukowski (above, left) sees things, artists could be worse off than ever before, due to the platform expansion. Given digital streaming services are becoming a major part of how artists connect to fans, he says labels are becoming increasingly irrelevant, which could diminish the amount musicians make across the board. "Spotify, Pandora and Apple are not record companies," he says. "They do not flow that money back to musicians to make records."

"These tech companies have many, many plans for where that income goes," Krukowski continues. "Musicians are not stockholders. We're not clients. We're not even providers. We're nowhere on the list. They did their deals with the major labels that gave them the keys to the kingdom …They're not counting on royalties for payback."

To an extent, Krukowski knows better than to expect financial rewards from Spotify. The longtime Galaxie 500 drummer, who recently has focused on his indie-folk project Damon and Naomi (below), has never made a living solely from music, despite his involvement in several critically acclaimed bands over the past quarter century. Along the way, he's attended graduate school, overseen a small book publishing house and taught at Harvard University.

Image: Damon & Naomi

Krukowski wrote a scathing feature for Pitchfork in November 2012 that berated Spotify, Pandora and other streaming services regarding how little they paid artists. Citing his BMI royalty check from that year's first quarter, he says Galaxie 500 received a total of $1.05 for the 5,960 times Spotify users played "Tugboat," one of the trio's oldest songs. His total share amounted to $0.35 — a better deal than most artists, since the band owns its masters. At that rate, he calculated one LP was worth 47,680 plays.

With major digital streaming platforms expanding, it's hard for Krukowski to see financial conditions improving for artists. He worries just a handful of companies controlling what music consumers have access to will ultimately hurt artists and their ability to reach fans, without sacrificing part of their paychecks. "We've never had that huge of a monopoly on the distribution of music," he says.

Krukowski's meager royalties portray a grim picture, with several companies dominating the digital landscape. It's kept large artists like AC/DC and Garth Brooks from working with Spotify. A growing legion of artists, including Atoms for Peace, Aimee Mann and LaRoux, have removed some or all of their catalogs from the service in protest.

"When you have people at the top of the industry saying they haven't been fairly compensated, you know that no one's being fairly compensated, not just me," Krukowski says. "It's [happening to] people getting [several thousand] plays, like David Lowery, or a millions of plays, like Thom Yorke, who feel grossly taken advantage of financially."

Lowery, Krukowski and other musicians have helped lead the conversation on streaming services by publicly discussing their royalty statements. Lowery, who currently works as a lecturer for the University of Georgia's music business program, received $12.05 for 116,280 Spotify streams for "Low," Cracker's huge 1993 single, over a three-month period. That's better, he says, than the $16.89 he earned for more than 1,159,000 plays on Pandora.

While Lowery thinks Spotify treats artists better, particularly given Pandora's attempts to lower the rates required to pay songwriters, he questions the Swedish company's ability to increase payments to artists, which its leaders promise in the years to come.

"Paid subscribers must grow for artists to gain a greater share of revenue," Lowery says. "That's indisputable … The percentage paid to artists cannot increase unless the rate of premium subscribers grows relative to free subscribers. And it's not clear that that's going to happen."

It's important to note that some analysts think Spotify's payouts only seem small, compared to downloads and radio plays, because they're incremental verus paid up front or spread out. They argue that if artists aren't seeing an equitable share of the revenue, the blame should be placed squarely on the record labels, not on Spotify.

Yorke expressed his views in blunter fashion when he tweeted in July:

Make no mistake new artists you discover on #Spotify will no get paid. meanwhile shareholders will shortly being rolling in it. Simples.

— Thom Yorke (@thomyorke) July 14, 2013

Nigel Godrich, Yorke's Atoms for Peace bandmate and Radiohead producer, added:

The numbers don't even add up for spotify yet.. But it's not about that.. It's about establishing the model which will be extremely valuable

— nigel godrich (@nigelgod) July 14, 2013

"We're 100% committed to making Spotify the most artist-friendly music service possible, and are constantly talking to artists and managers about how Spotify can help build their careers," a Spotify spokesperson replied to their remarks in Fast Company.

Recently, Yorke had even more pointed words for Spotify. In an expletive-laden interview with a Mexican website, he said fighting the service was a "massive battle" for the "future of the music industry."

Macias thinks his artists receive a fair deal from the music platform, but that it's too early to judge the service in the U.S. "It's a tree that will grow into a very sustaining shelter," he says.

He specifically cites Sweden, which he says has "grown into an entire forest," as a prime example of the service's potential impact on artists. The country has an estimated 1.5 million subscribers — 15% of its entire population. As a result, Spotify comprises 70% of the country's entire pre-recorded music revenues, more than any other individual retailer. Macias says those figures still haven't peaked as revenue has grown during each of the past five years, including a 14% jump in 2012 and a 12% rise so far in 2013.

"The impact isn't just theoretical or hypothetical — it's real," he says. "How anyone can make the argument that this isn't a viable business or they don't pay rights holders?"

In a Billboard op-ed, the Thirty Tigers president applied the Swedish market to one of his American artists, singer-songwriter John Fullbright, as an example to project the service's potential impact. He found a stark difference for the Oklahoma-based artist, who Macias noted had sold a little less than 20,000 records. Fullbright, who currently makes $2,300 from the service, could earn $65,000 if the U.S. had Sweden's market penetration.

Parks says Spotify is the best thing that's happened to Sweden's music industry in a long time. It's for those reasons, the ones Macias described, that he remains hopeful about the service's longterm potential across the globe.

"Artists are earning a livelihood now in a market that was absolutely dead before Spotify came along," he says, "It's an incredibly efficient and compelling way to deliver music to users. A big fraction of that population actually pays for this service. A bigger fraction uses it. And scale will turn every market into the Sweden experience."

Image: Flickr, Jon Åslund

In most markets, artists aren't benefitting from Spotify as much as its execs would like to see. The Swedish example hasn't transpired in many other countries, so the company is trying to prove its worth elsewhere. Beyond expanding its operations into new markets, Spotify hopes to curb illegal downloads and torrents. To do so, its officials have adopted an anti-piracy stance whereby it hopes the platform will be adopted by one-time illegal downloaders.

"If you're not going to pay for music, you're going to steal it," Levick says. "Spotify is a much better place to house your music legally and make it accessible for people so that they don't have to choose other options like piracy. "

Will Page, Spotify's director of economics, released a study this past July suggesting the digital platform may help lower piracy rates. Based on his research in the Netherlands, a country where the service has grown its presence, he reported that artists who opposed Spotify experienced a higher illegal download rate than musicians streaming their music through the service. Based on the study's findings, the company suggested it could minimize piracy in other markets where illegal downloading runs rampant.

Krukowski isn't convinced Spotify is fighting piracy for the right reasons. While company executives claim that want to end piracy for the sake of artists, he thinks it's merely a self-serving attempt for the company to improve its bottom line. It's a financial play more than benevolent goodwill toward musicians, he says.

"They don't have relationships with artists," Krukowski says. "They have relationships with shareholders. They are shutting down piracy for their own gain, not for the gain of the artists."

The company does stand to gain from shutting down piracy websites. According to Levick, it's an option that's better for artists than illegal downloads, which offers them little-to-no cash. "We have to license that music with rightsholders," he says. "That's what sets us apart from companies like Napster, which had a similar model as ours, except the difference is that they were technically stealing the music that people were listening to."

George Howard, an associate professor of management at Berklee College of Music and chief operating officer of the parent company that owns Wolfgang's Vault, Daytrotter and Paste Magazine, believes Spotify offers non-financial rewards, often overlooked since artists aren't receiving their money's worth. The longtime music business veteran says musicians now possess an important and undervalued tool to reach new listeners, who can become fans and may support their careers by purchasing records, tickets and other merchandise. More than anything, he says the platform's ability to connect bands to active listeners remains critical in helping artists make a living.

Austin-based songwriter Matt Hines hasn't broken through to a true mainstream audience at this point of his career. The founder of The Eastern Sea, a one-time bedroom project, currently sees the indie-rock group as a startup. In order to be successful, Hines believes it's crucial to get the word out about the project's music and thinks Spotify will help them achieve their goals.

"As a new band on the market, the majority of the music listening world is resistant to unknown names," Hines tells Mashable. "Spotify makes it easy to digest something new. If we keep the content high in quality, we can rely on Spotify listeners to deviate from their usual playlists and take a chance on something we know they'll enjoy."

In placing music on Spotify, Hines had made its catalog available to users beyond the group's active fan base. Fans of indie-rock acts California Wives or Mother Falcon can stumble upon The Eastern Sea in each band's "related artists" section. If cuts like "The Snow" or "The Match" gain enough traction, the songs can find their ways into Spotify's Radio rotation, on certain stations. Spotify may also help The Eastern Sea through its Discover tool, which creates an individualized homepage for consumers, based on their unique listening habits. If a user listens to The Eastern Sea, she might learn about one of the band's upcoming shows in her hometown.

So far, The Eastern Sea's exposure to new listeners has netted the band some fans and prompted them to buy records and attend shows. While Hines hasn't earned his keep from Spotify, the streaming platform has helped build a foundation with unlikely audiences who otherwise might have missed its music.

"Allowing our full albums to be streamed on Spotify is worth its bandwidth in gold," Hines says. "We meet people every night on tour that discovered our music by streaming, which ends up being dollars in our pocket in the long run."

Ogawa has had some fans, who discovered his work from digital services like Spotify, reach out to him. But he's also been on the consumer end and purchased concert tickets — Twin Shadow, Beach House, Alt-J — after using his premium subscription to check out new artists.

Not everyone believes in Spotify's promotional value and ability to drive digital and physical sales. While the service has launched features like Radio and Discover to improve user experience, they're also relatively new and not always used by listeners. And Lowery doesn't believe people are using features like Discover and Radio enough to actually provide much benefit to artists.

For emerging artists like Hines and Ogawa, Howard thinks it's particularly important to develop multiple revenue streams. Could Spotify pay artists better as it grows? Possibly. But the music businessman believes that speculation at this moment doesn't help acts make money today. What matters most, he says, is reaching fans through a variety of different avenues. And Spotify is part of that equation.

The Spotify House at SXSW 2012.
Image: Flickr, Johan Ejermark

At this point, Spotify will likely continue to increase its revenues and expand its footprint. The company will launch into new countries, grow its user base and convince more people to fork over $10 per month. What remains uncertain, however, is the rate at which consumers follow in lockstep as tech titans Google and Apple grow their presences in the crowded streaming music service market.

Remember Ek's promise to do right by artists? That can still happen, Levick says, if the company can continue its current levels of expansion and convince users along the way to buy into its relatively affordable premium model.

"A global Spotify, and a Spotify with hundreds of millions of consumers on it, presents a massive opportunity for artists," he says. "[At that scale], in Daniel's vision, he's right. Artists will be able to support themselves on that line of revenue when you're talking at that level."

Parks thinks it's unfair for Spotify's critics to point out the company's flaws in its infancy. The platform needs to scale first before it can be adequately judged. He remains confident it will eventually mature just like other online services have over the past decade.

"In 2003, iTunes was a small business," he says. "They weren't paying out a lot of money either. We're paying out a significant amount of money to our rights holders, and we're still just starting. This is something that can reach potentially everybody on the planet, and we've only sort of just touched the surface."

Apple, Parks adds, endured controversies with iTunes before the online retailer became a wildly successful venture. Radiohead, as he recalls, initially refrained from making its music available on Apple's digital retail service. To an extent, musicians who withheld their songs from digital retailers were fighting an ownership model based on the same basic principles as traditional record sales. Spotify is different given its access-based model, which could make battles even more arduous.

Parks acknowledges it could take even longer than iTunes to convince certain holdout artists to see the Spotify benefits. Metallica and Pink Floyd, two legacy acts that have reluctantly shared their catalogs, have made their music available on the platform during the past year. For those unwilling to work with the service, Howard says owners of master recordings have the ability to withdraw their catalogs. That's not an option all streaming services offer.

"They allow artists to drop from Spotify if it's not working for their model of how they want to make money," Lowery says. "That's actually a good thing to have [that] choice."

For Camper Van Beethoven's next record, Lowery says his longtime band cold-experimented with a "nuclear option." If all goes according to plan, his group will withdraw their digital rights so they're not webcast. It's difficult to make that happen, but other bands like Tool have successfully done so. He thinks that route may give artists an alternate option that leads to higher profits.

"We'd have this window, six months, where it's only [sold] on analog or only on some streaming service that wants to pay us a premium," he says.

Spotify doesn't publicly skirmish with it detractors, but rather points out how many are on the platform. Levick guesses that "99.9%" of all artists work with the company. For the remaining batch, they have an entire team, including Parks, who are willing to answer questions, engage in constructive dialogues and talk to artist management. But at the end of the day, he says it's making less and less sense for musicians to hold out.

"For an artist to deny their fans a way to listen to their music, that's not a good long-term strategy," Levick says.

Image: Flickr, Blixt

If one thing's certain, Spotify is nearing a tipping point as it celebrates its fifth birthday. The Swedish company has persuaded many observers of its merits, but still has a significant amount of work left to fulfill its promises. For every band like Spirit Animal that's able to pay its bills, there are plenty of musicians who see pennies on the dollar.

In some musicians' eyes, Spotify is the lesser of evils in the music industry. It's not as bad, some artists say, as companies like Pandora and Grooveshark, which are respectively lobbying to change laws in their favor or allegedly stealing from songwriters. Musicians do think the Swedish startup can treat them better en route to its grand vision.

One way to accomplish that goal, say artists, is to increase the transparency of how Spotify deals with musicians and ownership. The company could also place more limits on the service's free access in order to push additional listeners to subscribe. In addition, Pink Floyd drummer Nick Mason even suggested that a "50/50 split" of streaming revenues between artists and labels would be ideal.

As an inevitable watershed moment approaches, Spotify has a strong shot at redefining the music business. The platform has the potential to disrupt what's long been considered a broken and dying industry in need of major overhauls. Many believe the service is in the best position to right the sinking ship.

While Spotify may be able to help some artists today, enormous expectations have fallen upon the Swedish startup. Some opponents want the company to stop acting as a neutral third party unwilling to interfere with the music industry's longstanding practices. Like anything with promise, be it a one-hit wonder or a rising startup company, Spotify's praise at times has been overshadowed by its critics. Levick says even more patience is required, given its potential longterm impact. Perhaps he's right — maybe all Spotify needs is more time and a big enough window of opportunity from listeners and artists to prove its valor.

As Levick said, legions of consumers have already raved that Spotify has changed their relationship with music. But if Spotify's employees are really that obsessed with music and serving musicians, shouldn't they go one step further and disrupt the way artists get paid? If the company wants to be music's last best hope, couldn't it work toward redefining the music industry on all sides?

The remaining question isn't whether Spotify is capable of going that far, but whether its execs want to go all-in on their promises to artists. Only then will musicians truly look to Spotify as their savior.

Featured image: Mashable, Bob Al-Greene