Spotify has become one of the most used methods for listening to music in modern society. It is a digital streaming app which allows users to legally play music on their computers or mobile devices. The music streaming app also has a website www. spotifycharts.com where they publish the top 200 most played songs on their service. The song at chart position number one is the most played song on Spotify, the song at number two is the second most played song, and so on. Musician’s obviously want their songs to be as high up the chart as possible, but it gets harder to climb positions in the chart the higher up the chart you are. Why? Diminishing Marginal Returns.
Diminishing Marginal Returns is a concept in economics which explains the decrease in output per worker with the addition of each new worker added to the business when all factors of production stay at the same level. For example, if you own a bakery that can produce 50 loaves of bread a day with two employees and you sell these loaves of bread at €2 each you make €100 a day. Let’s say you employ two more employees but the factors of production remain the same (e.g. same amount of ovens) then the now four employees may only be able to produce 40 loaves of bread extra a day. So, you may now have €80 more worth of bread than you did with just two employees, but the output per worker has decreased with the addition of the two extra workers to just 20 loaves of bread each. Whereas the first two could produce 25 loaves of bread each.
The law of Diminishing Marginal Returns can be seen in this table which extracts from the Spotify top 200 charts as of 22:58 on the 04/04/2017.
If a song is at position 200 on the charts and wants to get to position 150, it must climb by 50 positions. To do this it needs to get more streams than the song in this position. In the case of the difference in moving from 200 to 150 in this chart the difference is 124,326 streams. These 124,326 streams will move you up 50 chart positions at an average of 2,486.52 streams per chart position.
If you go further up the chart and you wanted to move from position 20 to 10, which is only ten chart positions, the difference in streams increases to 833,318 streams and each chart position requiring 83,331.8 streams. As you move up the chart, the number of streams required to move you up a position in the chart increases because of the value of each individual stream is diminishing.
If we go up to the very top of the chart from position 2 to 1 the difference between them is a massive 2,186,266 streams. So, 2,486.52 streams were enough to move a song up 50 chart positions if it was at the 200 position but as it gets higher up the chart it wouldn’t be enough to move it up even one chart position. With the addition of each individual stream the impact this stream has on a song’s chart position is diminished.
by Daragh O’Leary