Spotify's direct deals with artists could disrupt the music industry for a second time

Shawn Knight

TechSpot Staff
Staff member

Several sources familiar with the matter tell The New York Times that over the past year, the 12-year-old company has inked licensing deals with a small number of independent artists. Most of the deals have been modest, with advance payments of tens or hundreds of thousands of dollars, but it’s giving major record labels a reason to be concerned.

Three labels – Warner, Universal and Sony – control roughly 80 percent of the industry. By signing artists directly, Spotify is essentially cutting them out of the equation. It’s a small step right now but down the line, it could completely upend the entire music industry.

Spotify didn’t comment on the matter when pinged by The Times so we don’t know which artists the company is working with or how many they have signed.

The report highlights two key advantages that Spotify is offering: a bigger financial cut for artists and ownership of their music. What’s more, it’s not exclusive, meaning artists are free to license their songs to other streaming outfits like Apple Music and Napster.

According to the report, Spotify typically pays record labels around 52 percent of the revenue generated from each song play. Labels then give the artist anywhere between 15 to 50 percent of that cut. Licensing directly with Spotify means an artist and their representatives get to keep the entire cut.

Spotify CEO Daniel Ek briefly touched on the matter during the company’s earnings call in July. “Licensing content does not make us a label, nor do we have any interest in becoming a label. We don’t own any rights to any music, and we’re not acting like a record label.”

Spotify’s contracts with record labels doesn’t allow them to turn into a record label themselves, sources tell The Times.

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Evernessince

地獄らしい人間動物園
Record labels are a thing of the past. It makes no sense to give them a huge cut of your profits when artists can reach their target audience so easily nowadays and there are plenty of platforms to do it on.
 

cliffordcooley

TS Redneck
Way past due!

"Three labels – Warner, Universal and Sony"

They had their chance to come forward with deals comparable to this. They only have their self to blame if they are now being cut out completely.
 

Danny101

TS Guru
Looks like a good move to me. The big labels have been milking the train and ripping off artists long enough.
 

toooooot

TS Evangelist
Record labels are a thing of the past. It makes no sense to give them a huge cut of your profits when artists can reach their target audience so easily nowadays and there are plenty of platforms to do it on.
Idk about that. Arent they supposed to or at least able to promote you in the ways small musicians would never be able on their own? I bet all popular and world known singers went through them.