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Does Spotify need to go after exclusive content?

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Spotify doesn't think so

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In the last four months, new albums and singles from Adele, Coldplay, Future, Drake, Beyoncé, Rihanna, and Kanye West haven’t been available on Spotify upon their release. This trend will likely continue with upcoming albums from Drake and Beyoncé avoiding the most popular streaming service when they drop.

Spotify is still the top streaming service around, but the company has done little to address the lack of new music from a large collection of major artists when their albums are released. The projects eventually show up — all of the aforementioned artists outside of Adele, Beyoncé, and Kanye West brought their projects over to Spotify a week after they were released — but that first-week hype and those streams can never be recaptured. The big question for Spotify: will this absence start to hurt its user growth in an increasingly competitive market?

It’s not a new phenomenon — this trend has dates back to 2011 when Adele’s 21 was kept off Spotify because the service wouldn’t accommodate her request for the project to be available exclusively to paying subscribers. In 2013, Beyoncé passed on putting her eponymous album on the platform, and Coldplay followed up in 2014, keeping Ghost Stories off Spotify — and all other streaming services — for four months. Arguably the biggest blow came when Taylor Swift pulled her entire catalog off the service.

Will the absence of exclusives start to hurt Spotify's user growth?

The single biggest complaint from artists about Spotify has been its free tier, which is ad-supported and pays out a much lower per-stream rate than its premium service. Artists feel like they’re giving away their music too cheaply. Financially, 15 million paid user streams on Apple Music is more valuable to an artist than 15 million streams from Spotify made up of both free and paid users. And the company has so far been unwilling to change its stance that any album put on the service must be available to all users, although there are reports that Spotify is softening its stance on the issue.

Spotify won’t sell out the majority of its user base, but if it was willing to pay artists for exclusives like Apple and Tidal, could it win these big names? Potentially, yes. Spotify once had its own exclusives — it had Led Zeppelin’s catalog exclusively for two years beginning in 2013, before the deal expired — but the number of major artists avoiding Spotify as a launch partner for their new projects is steadily growing, and the last notable exclusive Spotify had was a Prince single last summer.

Artists would likely be happy to have both the income from an exclusive, a key revenue stream in an age of declining album sales, and also be on the world’s most popular streaming service. Spotify paying artists for the rights to exclusive albums or to windowed releases — the industry term for a temporary exclusive release like Drake did with "Summer Sixteen" on Apple Music — could help close the payment gap between premium-only albums and albums on both tiers, alleviating the main issues keeping major artists off the platform during their release weeks, while not betraying its philosophical beliefs. (It won’t help smaller artists, but you can’t win everything.)

Right now, however, Spotify is betting on the loyalty of its users and a robust feature set that outpaces just about every other streaming service around. It has strong features like Discover Weekly and Spotify Running, and new additions like video content from major networks that it believes can keep users engaged in the service, despite the disruptions a missed album release may cause. And landing exclusives is not cheap.

Spotify is betting on the loyalty of its users

Drake reportedly got paid around $20 million in his deal with Apple Music, and Rihanna, Kanye, Beyoncé, and Coldplay each got 3 percent equity stakes from Tidal when they signed on to be owners in the service. Spotify did raise $526 million last June, but even if it was willing to pay, it would likely have to engage in a bidding war with Apple, Tidal, and perhaps in the near future Amazon and Google. If Spotify starts targeting artists for exclusive deals, the fees to lock artists up will inevitably rise, and that’s a fight Spotify can’t win against companies like Apple, which has hundreds of billions in the bank.

Luckily for Spotify, the influx of exclusive deals hasn’t seemed to hurt its growth at all — it’s reportedly nearing 30 million paid subscribers — which would mean that the rate at which it's adding new customers, and more importantly paying customers, is actually increasing. For its part, Spotify doesn't see these exclusives as an issue, and told The Verge it has no plans to pay for exclusives.

"We’re not really in the business of paying for exclusives, because we think they’re bad for artists and they’re bad for fans," Jonathan Prince, Spotify's head of communications told me. "Artists want as many fans as possible to hear their music, and fans want to be able to hear whatever they’re excited about or interested in — exclusives get in the way of that for both sides. Of course, we understand that short promotional exclusives are common and we don't have an absolute policy against them, but we definitely think the best practice for everybody is wide release."

He isn't wrong, exclusives can and do cause issues for both artists and fans. Drake missed out on his first number one record because his video for "Hotline Bling" was exclusive to Apple Music, and they don't share music videos streaming numbers with Billboard or Nielsen Music. But exclusives are also a reality of the music industry in 2016, and avoiding them altogether could have long-term ramifications. What happens when people burn through free trials that Apple and Tidal are currently offering to new users?

"We’re not really in the business of paying for exclusives."

Right now if you want to hear Kanye West’s new album The Life of Pablo, you can just sign up for a trial on Tidal and listen to it for free. But what happens if Beyoncé releases her album on Tidal in a few months and that trial has expired? Or when Drake releases Views From The 6 on Apple Music, and your trial has already expired when you used it the last time he released an album?

Spotify may also be banking on user burnout around exclusives. Does it make more sense to just stick with your favorite service, even if means waiting a week, instead of bouncing back and forth between different exclusives, or paying for more than one streaming service at a time? Of course the inverse is also true. Will users pay for Spotify and a second service, or will they just stick with whichever service offers up their favorite artists' content first?

That’s the question that should keep Spotify up at night — will its users keep paying for a service that requires them to hunt for new music from the world’s biggest artists during the first week of a release? Not having exclusive content can go from an inconvenience to a serious problem very quickly if Spotify’s competitors start to lock down superstars to their platforms for the foreseeable future.

So what do you think? Should Spotify go after exclusive releases to please its users and potentially end up in a bidding contest with Apple Music it likely can’t win? Or should it stand pat, and lean on its excellent feature set while users wait an extra week for projects from the world’s biggest artists?