Spotify has announced new changes for its advertising model, with new tools for creating ads and measuring their reach.
The changes arrive hot on the heels of its Loud & Clear annual royalty report, which revealed that from 2014 to 2024, Spotify’s yearly payouts to the music industry have increased 10x from $1 billion to over $10 billion. It also recorded its first full year of profitability at the end of Q4 last year.
Spotify refers to its new changes as the “next stage of Spotify Advertising”. As part of these new advancements, it has introduced the Spotify Ad Exchange (SAX) – this means that for the first time, advertisers can access Spotify’s engaged and logged-in users via real-time auction, with full addressability and measurement capabilities.
Furthermore, the streaming platform has also upgraded its “self-serve” Spotify Ads Manager with new tools including enhanced targeting and measurement capabilities, and there are now new ways for advertisers to create with Spotify using its Creative Lab and AUX (its music consultancy agency), plus its brand new Spotify Generative AI Ads tool – this can produce scripts and voiceovers, for example.
What does this mean for artists?
Spotify’s Global Head of Advertising, Lee Brown, says that Spotify Free users tune in to the platform for two hours each day. These are the listeners who hear these adverts. Although its new report doesn’t clearly outline how exactly these new advertising changes might affect artist payouts, it does report that its ad revenue has more than doubled since 2020.
As part of Spotify’s annual royalty report, it shared a video revealing how the money flows from its platform to artists and publishers, in which it said it pays rights holders roughly two thirds of every dollar it makes; this is from both users who pay for its premium tiers, and from advertisers on its free tier.
Spotify has faced criticism of its payout model over the years, but it addresses this through what it called the “paradox” of the modern music industry. “Streaming has allowed millions to easily share their music globally – that’s an amazing thing. But the sheer volume of uploaders means the fraction who find success appears smaller over time,” it says.
“The fact remains: Thanks to streaming, more artists than ever before are generating royalties at every career stage. More than at any time in music history. And we think that’s what really matters.”
To find out more about Spotify’s advertising changes, you can read more via its Newsroom.
