Taylor Lorenz’s Power User - How Spotify is Ruining Music: ‘It’s About How Power Works’

Episode Date: February 13, 2025

No platform has had more of impact on what we listen to over the past decade than Spotify. This week, Taylor is joined by journalist Liz Pelly, to discuss her new book "Mood Machine: The Rise of Spotify and the Costs of the Perfect Playlist."They discuss the profound impact Spotify has had on the music industry, culture, and the way we consume sound.Pelly reveals the truth about so-called "ghost artists" and other tactics the company has employed to squeeze artists and upend the content ecosystem.They also dig into how Spotify's algorithm-driven playlists have reshaped not just listening habits but also the very nature of music production, artist careers, and industry power structures.SUBSCRIBE TO POWER USER ON YOUTUBE: https://www.youtube.com/@TaylorLorenz

There started being these whispers that they had filled these playlists with fake artists who didn't exist. Over the past decade, no platform has had a bigger impact on how we consume music than Spotify. Spotify is a global behemoth with over half a billion monthly users. It has upended the music industry and forever transformed how we listen to and discover artists. But the shift to streaming has not come without a cost. Faceless playlists are packed with so-called ghost artists. Musicians are struggling to get compensated fairly and the entire listening experience has been reoriented around algorithms.

Spotify identifies listeners who are similar to you using a collaborative filtering algorithm. Journalist Liz Peli has been covering all of this, and she's here to discuss her blockbuster new book, Mood Machine, The Rise of Spotify and the Costs of the Perfect Playlist. Today, we're going to dig into how Spotify rose to power, what the company has done to the music and media ecosystem and how us music lovers can fight back. Liz, welcome to Power User. Hey, thank you so much for having me on. To start off, let's go back to the music.

to Spotify's origins. How did the company get started? And when did it really start to take hold? The company was created in 2006. If you're to take Daniel Ack and Martin Lawrenceon at their words, they officially decided to start Spotify at Martin Lorenzen's birthday dinner in 2006. At that point, the music business for years had been trying to figure out how to recover from the impacts of file sharing and the influence of, you know, Napster, the Pirate Bay. That was in the late 90s, 1989. Can you talk a little bit about Sweden and why this sort of company kind of, it seems like, could only have been founded there? In Sweden, because piracy was not just so rampant, but also politicized in a different way. You know, for example, there was something called the Pirate Party,

which was a political party that's main agenda was advancing the potential benefits of piracy in society. The music industry started to think of Sweden as a lost market. So they were more willing to license something like Spotify in a place like Sweden, including a free tier supported by advertisements, because in some ways it seemed like they had kind of given up on the idea that people were ever going to pay for music there. So Spotify grows in Sweden. Then it launches in the U.S. in 2011. How did it position itself and sell it to itself to American consumers when it launched? And can you talk about that launch in America, which was sort of, I feel like a big moment for them? There had been so much hype for Spotify in the United States and the music press before it even launched. So they didn't necessarily have trouble appealing to music enthusiasts and really excited music fans, early adopters in the United States. But they did. have to figure out new ways to appeal to a more mass generalized audience. It was only about a year after Spotify launched in the United States that they started inching towards what some other

researchers have called the curatorial turn or their shift towards not just being a search bar where you could go and find presumably any song or album that you could think of, but be more of a service that was built on providing you the perfect recommendation at the perfect moment. And then the following year, they would get into algorithmic recommendation more heavily. Can you talk about how Spotify introduced this playlist culture to music and what they meant by the concept of lean back listening? At this point, there had actually been many different startups and tech companies and digital music platforms that had been offering some sort version of curation or curated playlist. It was really when Spotify, like, launched their own

playlist creation system that the product started revolving a lot more around what they viewed as the lean back listener, you know, taking a lot more influence from something like Pandora than maybe how they saw themselves in the early years, which was like more like a fully stocked iTunes library with everything streaming through the internet. Yeah. And you talk about kind of also how this changed people's relationships with artists and people started to get beholden to these playlists and might not even notice the artists that are on the playlist or notice people being swapped out. Can you explain what ghosts artists are? And when did these start to emerge? One of the former Spotify employees who I interviewed for my book referred to the time period

of 2016 to 2019 as the peak playlist era. And because these playlists were driven by this supposedly meritocratic, data-driven, curation process, that this was somehow going to be like a really good opportunity for artists. These became a really important way of reaching people on these platforms because they took up so much visual real estate on the platform. It was also around this time, you know, this supposed peak playlist era where you'd start seeing whispers that they had filled these playlists with supposedly fake artists who didn't exist. And you would always see people on social media every few years, a post would go, or maybe even more frequently, a post would go super viral where someone would say, oh, I was listening to this study playlist and I started looking more

closely at the artists that are on it. And I realized, you know, not this artist doesn't have any information in their bio. There's no links. I can't find any information about them. Are they had like the AI generated looking images, right? I feel like. Yeah, totally. So like, you know, the album art seems to be potentially AI generated. So you'd always see, you know, there were a lot of Reddit threads about this and like people talking on social media. I got pitched this story so many times, I feel like of people being like, this seems fake. And a bunch of people did write it up, I think, but you got more details on it, right? Yeah.

Basically, as soon as I started writing about Spotify, people started hitting me up saying, you should look into Spotify fake artists. But at the beginning, I just like wasn't super convinced. It wasn't until 2022 when this bigger report came out of DN, the daily newspaper in Sweden, where some of their tech writers were able to access these copyrights. write documents and piece together that there were hundreds of artists monocers that could be attributed back to this really small handful of songwriters that were working with this production company called Firefly Entertainment that was also based in Sweden. And there appeared to be this really

long documented direct friendship between the person who started Firefly Entertainment and one of the former senior music programming executives at Spotify. They call it perfect fit content. It's specifically a type of music that they feel, you know, it's described internally as music commissioned to fit certain moods and playlists with improved margins for us. So that was like a one at around when it started to seem like the other is like a direct relationship there. You also mentioned that sort of Spotify has created this new type of pay to play system. Can you talk about that and sort of how in this increasingly crowded environment where, like you said, they're now commissioning people to kind of create these ghost artists.

How do artists start to try to break through? When I was writing about the ghost artist program, one of the things that was really important to me was to talk directly to the musicians who actually make this music that ends up on these playlists, the musicians who are hired by the production companies that have these privileged contracts with Spotify. And a lot of the musicians who make this supposedly fake music, ghost artist content, you know, they themselves don't have a lot of information about these programs. And, you know, they would say things to me, like, I just make this music and I submit it and I get paid and I don't really know what happens after that point. And a lot of these musicians, like, they're not like scammers or people with like, you know, this intention to steal playlist placement from other artists, even if that is old.

ultimately what ends up happening. A lot of them are musicians and artists themselves who can't make enough revenue through the streaming economy. So they're turning to these other gigs and thinking of it more as like a side gig in addition to the other revenue streams that they have to piece together. So I think it's just really interesting from thinking about the various different ways in which artists and people who, the artists who rely on these platforms are affected by their business practices. Yeah, and like you said, I feel like there is this, or there's been this sort of like culture to villainize those people or villainize the people that are also ultimately working on behest of this exploitative system that they're completely at the mercy of themselves, kind of it seems like for a living. And like you said, paint them as scammers when it seems like they're just, like you said, just trying to make a living like everyone else, I guess, on these apps. Yeah, and doing so without a lot of transparency, you know, like some of these musicians probably would reconsider some of their involvement

in some of these programs too if they actually had more information about what they're participating in, but because the contracts are completely secretive and there's such a culture of secrecy around the whole program, I think that is both to the detriment of the listener and to the musicians.

But, you know, the detriment to the listeners to, you know, listeners don't have any way of knowing when content that they're being showed is being shown to them because of some sort of ongoing pre-existing commercial deal. And that relates to both the ghost artist program and also the Discovery Mode program, which you're asking me about. Yeah, so let's get into Discovery Mode. And can you kind of talk about how that effort came to be at Spotify and what it entails? It was in the fall of 2020 when this blog post showed up on the Spotify company blog. And at first,

it was pitched as a way in which to supposedly give artists more control over which, songs from their catalogs were being surfaced through algorithmic recommendation. So it was sort of pitch like the Spotify experience is driven by personalization. And there are so many different data inputs that we consider that go into informing our algorithmic recommendation systems and the different personalized products that our users love. And now we're giving musicians the opportunity to add a new data point into these recommendations by specifically pinpointing tracks that they want to promote algorithmically in exchange for a reduced royalty, right? So, you know, right away when this was announced, it's called discovery mode.

It's public information for the most part, you know, on the Spotify for Artists website. Various different artists and artists advocates were quick to call this out and question whether it was just a new type of payola. So it didn't take too long. after the program was announced that, for example, there was an op-ed in Rolling Stone written by this organization called the Artist Rights Alliance, where they were asking some really big questions specifically about the similarities between something like this and a new type of digital payola. You could Google Spotify Discovery Mode, and that's the thing that most clearly differentiates it from payola historically, which is that, like, you know, it's not, doesn't fit the legal

definition of payola because the existence is sort of public and open. But it's interesting. And it has such a dystopian name. It's such a weird like, but but you're saying like the fact that it's sort of like open to all and that it is public differentiates itself from payola in the past, which is when that was sort of all behind closed doors, people like marketing executives would pay for songs to appear on the radio. Yeah, exactly. So on one hand, it's different. But then it also raises new types of concerns because they have built this into the business model. I think a big. thing that differentiates Spotify from maybe, like, you know, other platforms that get called

creator platforms is that Spotify is specifically in the business of directly monetizing the people who create the work that makes their whole platform possible. In the people who I spoke with, specifically musicians and people who work at independent record labels, the frustrating thing about something like discovery mode is that some musicians and labels saw that when they enrolled in it, they actually did see boosts and streams. You know, one of the independent record labels that I interviewed, the label manager said after they enrolled this one track in discovery mode, you know, people would say things to them like, oh, I've been hearing XYZ track really often in my algorithmic recommendations. Did you pay for that? And it caused this person to have to reflect

and think like, well, yeah, I guess we kind of did pay for that, you know, because we're accepting this lower royalty rate. And there are some people who feel like some independent label owners who I think feel sort of pressured to join programs like this or to accept these sort of terms because they're trying to do the best they can to promote the music on their labels. And then I think there are some people who have, you know, said hard no because they know the worth of their work and don't want to contribute to this sort of mass continuing, devaluing, continued squeezing of musicians by these systems. Yeah.

Can you talk about the potential impact that Spotify has had on sort of the long-term sustainability of musicians' careers? Something really big picture that you always hear is the way in which streaming has simply devalued music, right? And I think that that is the most obvious place to start. It's really hard to provide some sort of direction number. You know, there's this number that circulates in the streaming era that musicians get paid on average.0.035 cents per stream.

There's not really a way to calculate that figure because of the way that streaming royalties work. Musicians aren't being paid directly and their rights holders aren't being paid per stream. They're being paid a percentage based on stream share. So if a rights holder has 20% stream share in a. royalty period, meaning that their catalog accounted for 20% of the total streams that happened, then they'd get 20% of the eligible royalty pool according to the contract that they have

negotiated with the streaming service. There are so many extremely complicated factors, but one thing I should always point out is that those contracts are completely secretive and that most musicians don't have access to reviewing them. Most musicians don't ever get to see directly the terms dictating their relationship with these platforms, which makes it really hard for them to even know what questions to be asking when thinking about, like, you know, how to make it more fair. Right, or advocate for their own interests. Can you talk about also just how Spotify has changed the sort of structure of how we listen to music and sort of disrupted the idea of like an album release. It seems like they've sort of atomized music in a lot of ways.

and we sort of consume it all now through these playlists or sort of algorithmically generated recommendation systems. Well, something that I think can never be understated is how much it changes the relationship with music when the monetization of it is based on a per stream model. So artists aren't necessarily getting paid per stream, but the total number of streams that they have is a big part of how the royalty calculation are made. So it is a system in which, you know, the value is on individual streams and not on albums. There's different types of music that gets incentive, like the creation of certain types

of music is incentivized. There's a certain relationship. What kind of music gets incentivized versus disincentivized under this model? I feel like there's like a couple of things, right? I have this great interview with the musician Anoni in my book. And she talks about how the per stream valuation of music encourages a narcotic relationship with music as opposed to like a sort of more meditative relationship with music. And I thought that was such an interesting way to put it. You know, it really, the streaming model I think really does sort of push, especially with the rise of, you know, streaming mood playlists and vibes based playlists does push this model of thinking about music as a means of mood stabilization. So in the,

thinking about the impact of mood playlists, of chill playlists, there have been a few different effects over the years. On one hand, you'll see these instances of musicians looking back at their catalogs and realizing that the song from their discography that is the streaming hit, the song that's being added to all the playlists, both editorially and algorithmically, might be, you know, the song that is the most playlist friendly. Maybe it's the song that's the most chill. It's the song that is the most sort of like, you know, some would say boring and offensive. It's music that is tailored to attention in different ways. I feel like there's been a bunch of conversation lately, too, about AI generated music on Spotify or these longer

AI generated pieces of music. Do you feel like they might soon embrace that? So Daniel Eck has in interviews talked about how he thinks that there's a lot of potential for generative AI music, that it could be good for culture. Generative AI music. is allowed on Spotify. There's tons of generative AI music on streaming services that gets added to streaming services every day. There's a lot of concerns about consent and artists being able to know when their music is being used

as training data to train models to pump out content and give both AI companies and streaming services this new pool of really cheap content. There are also a lot of really, really, meaningful ways in which just the way in which we discover music and the way in which meaning is created around music has been impacted by various systems of machine learning and algorithmic recommendation and AI over the past 15 years or so, the whole, you know, the whole course of the streaming era. And I think those conversations in some ways are, you know, they're equally important

to think about in terms of the impact of AI generated decision-making on the relationship with music. How has Spotify's emergence affected the broader economics of the music industry as a whole? One thing that I tell the story of is the Living Wage for Musicians Act, which is a bill that was written by this group called United Musicians and Allied Workers alongside Rashida, Congresswoman Rashida Talib. And in one of my interviews with one of her staffers, he said that, you know, to him, one of the biggest concerns is that when you listen to music on a streaming service, you're not just listening to music, but you're also consuming someone's labor at a really artificially reduced price point. And I think that there's so much that has happened in the streaming era to not just devalue music, but really invisibilize a lot of the labor that goes into creating music. Like even just recently you had this example. of Daniel Eck. He made a comment kind of recently about how, you know, today the cost of creating content is close to zero. I think I saw that. Yeah, I think it speaks to, you know, the moment in a lot of ways, the way that these companies think about the work of the people who make their whole platforms possible, you know, like something like Spotify does not exist without music and for the

person who's the CEO of the company to not understand how much labor goes into creating. music is really startling, actually. I mean, it's so funny to read your book and as somebody that covers a lot of these social media platforms just see so many parallels, like not just in the rhetoric from the CEOs, but the way that they sort of devalue creative labor systematically over the years. And Spotify has also emerged. I mean, obviously it is still primarily a music-centric platform, but they've been moving so heavily into podcasting and video. Can you talk about the emergence of that strategy and why do you think they're moving away from music in sort of recent years? It's a great question and I think a really important point. Something that I talk about really

early on the book and telling the very early history of Spotify is how when Spotify was when the idea of it first occurred to Daniel Lack and Martin Lawrensen, it was not necessarily an idea for a music streaming platform. It was an idea for a platform that would deliver a library of content to someone for free, supported by advertisements. You know, the subscription model came up later. At first, it was built on their backgrounds in the advertising industry. And I point directly to this early interview with Martin Lawrence, where he talks about how in the early days, they weren't even sure if they would do music. They would consider doing a video service, that maybe it would be audiobooks, maybe it would be product search, and how it was an advertising

product, and they were trying to figure out what the traffic source was going to be. Obviously, there's these examples of these really high dollar amount direct deals that they've done with some podcasters or, you know, sums of money they've paid in order to get podcasters on the platform exclusively. But for the most part, this isn't content that they have to pay for. In a lot of ways, podcasting is, you know, an example of an industry that is not as regulated as music. And I think that that's one way to think about Spotify is it's an idea for a platform. that delivers content, that monetizes it in certain ways. But it seems like they've always just sort of been in search for a way to provide that

content in a cheaper way, whether it be through commissioning ghost artists, figuring out ways to squeeze artists for fewer royalties, or figuring out new types of content that they don't have to pay royalties on at all. That's what it seems like to me too. And I feel like a lot of people like Daniel Eck and others, it seemed to look at the sort of creator economy or content creator ecosystem. Like you said, as sort of free content, free labor. Mark Zuckerberg talks about content and labor the same way,

where they sort of just consider that whole industry as an endless source of basically people willing to create content completely for free. Not even for any sort of immediate monetization either, but sort of the hope of maybe one day eventually monetizing a small amount. And like you said, there's no big music companies to get involved. There's no record labels like to negotiate with. It's really just an endless source of, yeah, free content. It's super interesting. And I think the comparison with Mark Zuckerberg is important for people in the music business to keep in mind to. Speaking of Spotify's role in the tech world, you know, we're seeing all of these tech leaders play a bigger part in the Trump administration.

They were all standing right behind him for Trump's inauguration. I don't think Daniel Eck was there. Maybe I'm wrong. But what role do you see government regulation and government oversight playing in? this sort of new model. I mean, do you think that Spotify should be regulated in some way? Yeah. So interestingly, as far as I know, Daniel Eck was not there, but Spotify certainly had a presence in DC. They did. That's true. Inaguration, you know, there were headlines around Spotify donating $150,000 to the presidential inauguration committee, which somehow pales in comparison

to the numbers that were donated by other tech companies. And they hosted these, this like podcast, brunch with Joe Rogan and Ben Shapiro the day before the inauguration. So I think that it's pretty clear the, you know, extents they're willing to go to to have proximity to power in D.C. I do think that we need to both be thinking about, you know, the full alternatives to the corporate music business and the streaming economy, but also at the same time thinking about the various levers of power that could be pulled in terms of regulating these companies. There is a role that the FTC could play. I mean, it obviously is like a lot of questions around how possible that will be in the new administration.

But for example, in my book, I points to the ways in which the FTC could step in to regulate digital payola. And I also think that in a lot of ways, you know, the issues with the streaming era are just issues of corporate power in the music business, more broadly. and in culture more broadly. So there is clearly an antitrust perspective to be brought to the conversation around streaming services, whether it be looking at the ways in which digital payola is a deceptive practice for listeners, thinking about the ways in which a lot of these practices

impact musicians' abilities to make a living, and then also just looking more broad broadly at the outsized corporate power of both tech giants and the major labels and the different ways in which that might be regulated. I guess if we're looking for an administration to crack down on corporate power, I don't know that we're going to get that from Donald Trump. But it's so hard. I mean, I feel like Spotify has become the sort of de facto place where we go to listen to things now. So what can people that want to be more responsible in this ecosystem do? And is there any impact that individual users can have? It's a great question. I think that

Something that always comes up is, you know, this idea that individual solutions to collective problems can feel really weak. But I do think that there are some things that we can do as individuals to sort of push back on this feeling of utter powerlessness. Maybe just to think about some of the more collective solutions, right? Like, I do think that like tapping into the work that different musicians, unions or solidarity groups like United Nations, musicians and allied workers, music workers alliance is another one. They're, you know, like, just even simply just like following and help boost the efforts of these musicians unions, I think is really important in terms of supporting the people whose material realities are really

impacted by these systems. So there's that. There are, you know, different organizations, groups of musicians and people in the music world who are trying to to build alternative platforms. There have been some experiments with cooperatively run streaming platforms that I think are really interesting, different kind of like collective, small scale. What are they? So, well, in the book, I talk about a couple. I talk about this platform called Resonate that is defunct now, but it launched in 2015 and it lasted until just a couple of years ago. And it doesn't exist anymore, but I think that there actually are like some really interesting lessons from looking at the trajectory of that platform.

It was a cooperatively run streaming service where it was like basically like, you know, you could join as a member as a musician, someone who worked in the music business, a listener. There was like a annual meeting that you could attend and sort of like weigh in on the trajectory of the platform. He seems so utopian and I feel like they always fail. I hate to be a dumer, but it's so depressing. The thing about the business model that I thought was really interesting is that it was, they called it stream to own. So instead of paying a monthly subscription fee, you would sort of top up your account. And then every time you streamed a song, you know, there would be a price for it. So I don't remember the exact, but it was something.

I love that idea, actually. Yeah, something similar. It's like paying a down payment. Well, you'd pay something similar to like 0.001 or something. every time you streamed it, but then once you streamed, like, did like a dollar's worth of streams on a track, then you would just own it. And I love it was super interesting because the model that, you know, what I always advocate for when people are like, what should I do to support musicians directly is, you know,

again, all of the things that are worthy of critiquing with band camp, but the band camp model of buying music directly from musicians who you want to support, I think does have a lot more, like long-term sustainability. And I also think that like when you build up your own digital library of music, you just develop a different relationship with the music. So, you know, the stream to own model I thought was interesting because it kind of combined both like the try before you buy kind of dynamic of streaming that people seem to like while also, you know, involving a direct exchange with the person who's music you're listening to. I will say like one of the most common, like something that musicians and musicians unions have been advocating for years as a reform to the streaming model

has been this royalty model called user-centric, which is where, you know, instead of this really complicated revenue share model, user-centric is this proposed model where I pay $10 a month for a streaming subscription, the streaming service gets its 30%, and then the seven extra dollars goes directly to the musicians who I stream. So if I just streamed, one artist all month, then they would get the extra $7. And I think in some ways it is more explainable. It's more direct. I think that it would give people a more direct investment in the music that they

listens to. And it also would help to combat some of the issues with streaming fraud that the music industry seems so concerned about. So definitely something that a lot of people have been asking for for a while. And you have seen like some platforms try to experiment with it, like SoundCloud, for example, like introduced it a few years ago. Awesome. Well, I hope that we get a better music ecosystem.

It sounds like, I mean, just your book is paint such a sort of, I mean, it's a great critique of, I feel like what we have now. And I feel like it also just furthers this idea that we need to value creative labor. Because I feel like that it's, these tech companies have sort of so successfully devalued it. And our lives are so controlled by these algorithms and systems that we don't see. So, yeah, I really appreciate you. breaking it all down. Liz, thank you so much for joining me today. Thank you so much for having me. All right, that's the show. You can watch full episodes of Power User on my YouTube channel at Taylor Lorenz. Don't forget to subscribe to my new tech and online culture newsletter, usermag.co. That's usermag.com.

If you like the show, give us a rating and review on Apple Podcasts, Spotify, or wherever you listen. And thanks to Chris for editing this week's episodes.