Is Spotify's Discovery Mode program unfair?

In November 2020, Spotify announced Discovery Mode, an initiative that allows artists to gain greater exposure within the platform in exchange for a 30% reduction in royalties. The streaming service still presents the project today as an opportunity for those who want to prioritize certain tracks from their musical offering, thus influencing how Spotify's algorithms suggest songs to users. However, criticism continues. According to an investigation by The Guardian, many music industry observers and artists' rights organizations still consider Discovery Mode as a form of “payola”, the practice – now illegal – carried out by some radio stations in the post-WWII era that involved receiving payments in exchange for airing certain tracks, artificially inflating their popularity. Although Spotify’s program does not involve direct payment, experts argue that the reduction in royalties could penalize independent artists, favoring those with more financial resources to support this promotional strategy. The Artist Rights Alliance, a US association representing the interests of musical artists, in an editorial published on Rolling Stone, described Discovery Mode as a way to make money off the backs of musicians. Even the US House Judiciary Committee, which among other things deals with antitrust and copyright issues, has raised concerns that the program could lead to a “race to the bottom,” forcing artists to accept lower payments in order to have a better chance of being heard.

The Guardian reports that even some Spotify employees have expressed concerns about the ethical implications of the initiative, noting that the promoted tracks are played at the expense of other artists. Additionally, several musicians and managers have pointed out that the lack of a clear disclaimer could deceive listeners, who do not know whether a track was selected for its artistic merit or because of a commercial agreement. From an economic perspective, Discovery Mode has proven to be highly profitable for Spotify. According to internal documents cited by The Guardian, within a year the program generated over 60 million euros in revenue, with significant profits mainly coming from the independent music sector. Furthermore, the program is part of a larger monetization plan carried out by the platform: in addition to Discovery Mode, Spotify has launched other paid tools like Marquee and Showcase, which allow artists to gain visibility through promotional ads. While Spotify has not commented on the revenue generated, it has responded to criticisms by denying any analogy with the so-called “payola,” stating that users can access a policy – which many consider excessively vague – outlining the methods that determine music recommendations within the platform.

Meanwhile, the debate about the need to revise the business models of the major music streaming platforms continues, raising doubts about the ethical sustainability of the industry. Another case that has recently put Spotify in a bad light concerns an investigation by Harper’s Magazine. The US magazine reported that for years, Spotify has been trying to influence users' tastes in order to encourage them to use background playlists more frequently in their daily activities. For this reason, the platform has allegedly encouraged the discovery of such collections based primarily on the imagery and “mood” they evoke, rather than the artists and songs included. Spotify may have populated these collections with so-called "fake artists," who collaborate with the platform to produce a large quantity of tracks to be used in its famous mood playlists – such as the well-known “Stress Relief,” “Lo-Fi House,” or “Chill Instrumental Beats,” among many others. This operation would allow Spotify to save on royalties paid to actual musicians, thanks to preliminary agreements with selected composers that are more cost-effective.