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- 🎯 Playlists are Spotify’s moat
🎯 Playlists are Spotify’s moat
More than just the music
Read time: 2 minutes 56 seconds
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Today, an interesting question came up in a call:
“What are the 3 greatest websites?”
The 3 that instantly came to mind: YouTube, Wikipedia, and HackerNews.
Does Spotify count?
(since the Spotify desktop/mobile app > the Spotify website/webapp)
If it does, it might sneak in.
Let us know your 3 by replying to this email.
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Playlists are Spotify’s moat
Chess Move
The what: A TLDR explanation of the strategy
It’s no accident that listeners spend about half their time on Spotify listening to playlists.
For years, Spotify has done everything they can to incentivise users to create, share and listen to playlists.
Why?
→ Playlists let users craft their own personalised experience.
→ They also provide Spotify with valuable data about user habits and preferences.
→ But perhaps most importantly, playlists embed Spotify as a central, powerful, and indispensable part of the music industry.
Let’s unpack how:
Breakdown
The how: The strategic playbook boiled down to 3x key takeaways
1. Make everyone a DJ
Spotify changed the atomic unit of music from albums → playlists.
Playlists are inherently personal; they reflect a user’s identity, taste, and mood.
Importantly, this means playlists aren’t just something that users create for themselves - they are made to be shared.
By turning each user into a mixtape curator, Spotify created a system for people to create and share Spotify invite links in a meaningful, personal, and non-spammy way.
Playlists became the fuel for Spotify’s organic growth engine.
2. A new surface for innovation
Over time, Spotify adapted playlists to make them as shareable, personalised, sticky, and monetisable as possible:
Collaborative playlists: Create playlists with your friends (and invite them to Spotify in the process).
Public playlists: Let anyone listen to your playlists, and display them proudly on your Spotify profile.
Smart shuffle: Get personalised song recommendations interspersed throughout your playlist (for Premium users only - driving increased conversions).
“Made for you” playlists: Get algorithmically generated playlists, based on your activity, for an auditory journey that is uniquely yours.
Sponsored playlists: Give brands access to a listener’s moods, moments, contexts, and desires, by featuring their messaging in ad-breaks for free users.
3. Playlists as a strategic moat
By synthesising vast amounts of metadata on song pairings, preferences, behaviours, listening history, and platform interactions, Spotify emerged with the unique ability to craft perfectly curated “Editorial Playlists”.
These became the guiding tool to minimise listeners’ selection cognitive load, making Spotify the go-to place for music discovery.
Editorial Playlists also marked a broader shift of powers in the music industry: putting Spotify “in control of the demand curve.”
For artists and labels, getting a song into an Editorial Playlist is one of the most powerful growth levers available - featuring in Spotify’s “Viva Latino!” playlist results in US$303,047 to US$424,265 in royalties.
Since Spotify doesn’t own the music on its platform, playlists are the key mechanism through which they exert “curatorial power” and build strategic advantage.
Nearly every screen in the app (Home, Search, Genres, “Picked for You”, even artist profiles) funnels users towards Editorial Playlists.
Rabbit Hole
The where: 3x high-signal resources to learn more
[25 minute read]
Spotify’s recommendation system is a strategic and technological marvel.
Without it, Spotify is the world’s best music player.
With it, Spotify is an automatic conversion and retention machine.
Here’s how it harnesses the collective wisdom of users to generate personalised suggestions, build musical maps, and make emotion-driven decisions.
Data science wizardry.
[36 minute read]
To go deeper on the music industry paradigm shift Spotify is pursuing, this is your pandora’s box.
“Spotify was paying producers a flat fee to create tracks under fake names in order to fill out Spotify curated playlists and thus reduce royalty payments to record labels… Over 90% of the tracks on the Spotify playlist “Ambient Chill” were under the names of these so-called ‘fake artists’”
“Given the aforementioned importance of playlists in an artist’s career, the promise that licensing one’s music to Spotify might result in advantageous playlist placements is an attractive offer”
[7 minute read]
Apple Music is THE existential threat to Spotify’s existence.
Quite a tricky spot when a huge portion of your users have iPhones, iPods, MacBooks and Apple Watches.
This website is Spotify’s swing back at Apple for a decade of fiercely competitive moves, like:
→ Imposing a 30% commission on payments (eg upgrading to Spotify Premium)
→ Blocking any external links to product info, discounts, or promotions
→ Stopping Spotify from making an Apple Watch app
→ Preventing Siri from playing Spotify
That’s all for today’s issue, folks!
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