Spotify in Pakistan: Will Pakistani artists finally be able to make a living off their work?

The music industry in Pakistan has witnessed significant growth and evolution in recent years. With a rich musical heritage and a large population of music enthusiasts, Pakistan has become a vibrant market for music consumption and production. Traditionally, the music industry relied heavily on physical music sales, such as CDs and cassettes, as well as television and radio airplay. However, with the development of digital technology, the landscape has transformed. Online streaming platforms have gained prominence as the preferred method of music consumption.

One notable addition to the Pakistani music scene was the introduction of Spotify in 2021 as an online streaming platform. With a huge library of local and international music, this platform has had a significant impact on the way people access and discover music in the country. It provided Pakistani artists with a platform to showcase their work to a wider audience. Having said that, it allows users to stream music on-demand, create personalized playlists, and discover new artists and genres. Spotify’s algorithms also provide recommendations based on users’ listening habits, further enhancing the music discovery experience.

But what does this mean for existing online streaming platforms in Pakistan? Is Spotify going to sustain itself in this market? We find out…

Spotify offers a new avenue for distribution and monetization for musicians. They can upload their music to the platform, potentially reaching millions of listeners worldwide. Moreover, Spotify’s analytics and data insights enable artists to gain valuable information about their audience and tailor their marketing strategies accordingly.

The arrival of Spotify in Pakistan has brought competition to the existing online streaming market. Local streaming platforms, such as Patari and Saarey Music, have also been popular among Pakistani listeners. What sets each platform apart, in terms of its business model, number of subscribers and how they plan to sustain itself?

How do these online streaming platforms work? 

When we talk about Spotify, it made a fan base in the country much before it decided to launch here. We spoke to the Spotify Pakistan team who told us that the way it generates revenue is from both brand advertisements on the free service and users who pay for subscriptions.

The platform uses a Freemium model which allows users to choose the tier that works best for them. It introduces users to the Free service and then offers subscriptions. Payments can be made via cards or local partnerships. The updated ad-supported Free experience in Pakistan allows users to choose any song, skip tracks, and stay connected to new releases. Premium offerings provide uninterrupted, ad-free music and cater to different user needs with plans for students, couples, families, and more. Increased engagement leads to growth in the advertising business and subscription base. Spotify aims to increase monetization and subscriber growth throughout the life cycles of its listeners.

Spotify shares 70% of revenues with the rights holders. It has paid over $30 billion in royalties to the music industry, contributing to major music and record labels earning over $4 billion in profits in 2021. 

Faisal Sherjan, a founding member of Patari, launched in 2015 and was one of the pioneering online streaming platforms in Pakistan, told Profit that the platform started with a realization that artists needed to be paid for their work to sustain their careers. The founders understood the market dynamics and had expertise in monetizing music.

He stated that the platform initially faced difficulties due to the lack of micropayment options and the high revenue share demanded by mobile networks of around 70%. To support the platform, sponsorships were sought, but these were primarily focused on branding rather than directly benefiting the artists. 

“The monetization aspect remained a challenge for Patari. Unlike Spotify, which expanded to Pakistan without creating specific features for the local market, Patari had to navigate the complexities of the Pakistani music industry,” Faisal told Profit.

Patari differentiated itself by exclusively focusing on Pakistani music, showcasing the country’s diverse sounds and creativity. It aimed to promote and highlight local talent rather than relying on popular Indian item songs, which were dominant at that time. Over time, it expanded its offerings beyond music to include podcasts and audio literature, making Urdu literature more accessible through audio files.

Patari’s current user numbers are not readily available, as the platform has not been actively promoted or marketed recently. However, it is estimated to have around 20,000 to 25,000 active users, with minimal costs involved in maintaining the platform.

In Q1 2023, Spotify achieved its strongest performance since going public in 2018. Monthly Active Users increased by 22% YoY to 515 million, driven by all age groups and markets. Premium Subscribers grew by 15% YoY to 210 million, with Europe and Latin America leading the way. Total revenue reached €3.0 billion, a 14% YoY growth, primarily attributed to subscriber gains. Gross Margin improved to 25.2%, reflecting enhanced profitability in music and podcasts. Operating loss/income stood at €156 million, benefiting from reduced marketing expenses.

Similarly, Faraan Irfan, Founder of Saarey Music spoke to Profit about how the platform works. “It is a digital music platform focused on providing access to South Asian classical music. The sustainability of their focus on classical music in Pakistan has been surprisingly successful. The platform was initially launched as a passion project to provide access to quality music and they have received a grant from the UK government to build their platform and plan to generate revenue through subscription fees, service fees for transactions and bookings, and institutional subscriptions”, he said. 

“The subscription fee for Pakistan is Rs 490/- per month, and we offer monthly, half-yearly, and yearly plans for individuals. The platform also has institutional plans starting at $1,000, allowing universities and other organizations to use the platform for research, classrooms, and events,” he said.

Since 2022, Saarey Music has experienced significant growth with a 70x increase. Although the total number of subscribers remains undisclosed, it is mentioned that they have surpassed half a million users. Their user base comprises mostly 18–35-year-olds, with 53% falling within this age range. Moreso, 70% of their users consider themselves beginners to the genre, highlighting the appeal of accessing classical music. The retention of paid subscribers is exceptionally high at 94% per month, compared to an industry average of less than 20%. This suggests that classical music has a special appeal that larger streaming services have not fully realized.

How do artists make a living through these platforms?

Spotify prioritizes supporting musicians and songwriters, maintaining the same approach in Pakistan as in other markets. The platform stimulates industry growth and ensures fair compensation for rights holders. Having said that, Profit spoke to Roshaan Sherwani of Hassan and Roshaan, a Lahore-based pop duo who told us how Spotify works every time they release a new song on the platform. 

“Spotify has impacted the music scene in Pakistan in a positive way as it is the only major streaming platform that is operating in the country. This way the musicians are getting to thrive on an internationally popular streaming service which means greater exposure to audiences outside Pakistan as well,” the singer said. 

This is majorly why a large number of local audiences are subscribing to the platform as the marketing strategy for the platform in Spotify is catering to the interest of the listeners in the sense that the advertisement campaigns and promotions are tailored for the Pakistani audience.

“We use a platform called DistroKid to distribute our music to every major streaming service, including Spotify, Apple Music, Shazam etc,” Roshaan told Profit. He further added that “Spotify gives out (significant) royalties to artists unlike previously used platforms in Pakistan; the more popular their page the greater the royalties per stream.” This has encouraged music creators to make a decent earning from their music, similar to what YouTube did for video creators. 

This was further put into perspective when Hassan & Roshaan’s Manager Nael Hafeez told us that Spotify Pakistan has a large number of subscribers as compared to Apple Music and other music streaming platforms, which aren’t as present in this market as yet. He also gave us an insight into how record labels work, which started to grow in the last 2-3 years. A label invests in artist(s) and doesn’t thrive on distribution per se.

When it comes to big distributors like EROS, and Sony Music the music that gets uploaded on their YouTube platform is enough for an artist to get the exposure he needs. However, labels distribute on behalf of the artist under their name and keep a certain percentage of the royalties. For Hassan & Roshaan, DistroKid had a fixed yearly fee of about $35 with no commissions. That means the artist gets to keep all the proceeds. 

Roshaan also stated that their monthly listeners on Spotify are about 550,000 (Total streams in the last 28 days have been 1.6 million) and for Apple Music, they have a total of about 42,000 listeners (total streams in the last 28 days have totalled up to 80,000). The contrast between the two platforms is mainly due to Spotify’s presence in Pakistan and Apple Music’s absence, which shows the impact Spotify’s arrival has made. 

Comparably, Patari was there at a time when piracy sites and unauthorized music downloads were prevalent. The Pakistani music industry faced challenges related to copyrights and monetization, as artists relied mainly on live performances to earn money. Patari aimed to change this by providing a platform where artists could monetize their music and listeners could pay for access. When the platform was launched, it was the first to pay royalties to the musicians. According to data available online, established musicians like Noori and Strings made between Rs 180,000 to 200,000 whereas aspiring musicians managed to earn between Rs10,000 to 30,000 at the time. 

 Similarly, Faisal Sherjan stated that Patari requires investment for technology upgrades and promotional activities to remain in the picture.

“A potential model for the platform’s future sustainability is a channel inspired by YouTube’s Patreon channel,” he said, adding that it is a place for artists/bands to build memberships by providing exclusive access to their work with a monthly fee which contributes a certain amount to enable them to produce more music. With the advancement of micropayment options, this model could be more feasible now.

Moreso, Faraan said that when it comes to exclusive rights to all recordings from Pakistan, Saarey Music has rights to around 85-90% of them. They prioritize quality music and have a process in place for artists to submit their content. The platform takes care of various aspects, such as editing, mixing, publishing, marketing, and album covers. The services they offer to artists cost around $3,000 to $10,000 per album.

However, the platform does not provide any royalties to artists, as they believe the promise of artists making money from streaming services is often false. “The focus is on providing artists with exposure, paid performances, and access to a global audience. Permission is sought from artists before releasing their music, ensuring their involvement in the process,” Faraan affirmed.

In terms of revenue, Saarey Music has not focused on monetization initially but plans to start doing so now. The growth in revenue last year was approximately 165% and had a high gross margin of 82% in contrast to the industry standard of around 30% for streaming services like Spotify. 

Programs launched by Spotify to sustain artists

The Spotify representative stated that the platform provides opportunities for more creators to succeed by providing different programs for these artists. 

‘Spotify for Artists’ onboards young musicians and their management teams, educating them on the platform’s benefits. In Pakistan, Spotify launched the ‘Fresh Finds Pakistan playlist’, promoting independent artists and helping them gain global recognition. The EQUAL program in Pakistan highlights female musicians, with ambassadors featured on Times Square billboards, expanding their listenership worldwide. 

Not only that, Spotify conducted Masterclasses in Karachi and Lahore, covering topics like Spotify for Artists’ tools, release planning, and utilizing the Loud and Clear platform for transparent monetary payouts. These initiatives empower independent and female artists while fostering growth in the music industry. 

So, will Spotify survive in Pakistan? 

The answer seems likely as partnerships with various brands are a good strategy to stay in business. Spotify has partnered with Velo Sound Station and Coke Studio Pakistan which is a great way to promote Pakistani music to a global audience. Spotify has a large user base and this way they can reach a wider audience than ever before.

Spotify partnered with Coke Studio for the first time in 2022 and with Coke Studio Pakistan it provides users an immersive audio experience through new releases and curated playlists. It hosts all Coke Studio songs and artists previously featured on CS, thus, through this partnership, all CS artists are now able to share their work with the global reach to fans all over the world.

Similarly, the tracks from the second season of VELO Sound Station are now available on Spotify, and the artists and songs are set to appear on a global stage. With Spotify being available to 515 million users in 183 countries, the collaboration between these two music culture powerhouses brings users the content they love and makes it easier than ever to listen to songs from the emerging format of music that is reimagined with modern touches.

In conclusion, pioneering platforms like Patari and Saarey Music have played significant roles in shaping the industry and provided a platform for Pakistani artists to earn money and promote local talent. However, with the introduction of Spotify in Pakistan, the music industry is expected to adapt, thrive, and attract more streaming services and music labels in the future, fostering a stronger musical culture in the country. The future for the Pakistani music industry seems very bright with the presence of a major streaming service and a thriving musical culture. If it continues like this, we are hopeful that we will be introduced to many more streaming services and platforms like Spotify will continue creating some Pakka Hits for Pakistan.