Eamonn Forde takes a closer look at at how Spotify’s direct deals with artists and managers could play out, and how it could improve its relationship with music publishers by following a similar model for writers.
Billboard broke a story at the start of June suggesting that Spotify was approaching managers of independent acts and dangling significant advances in front of them. It was done with a view towards signing direct deals with the streaming service – thereby cutting out labels and indie distributors – for a variety of their artists.
Spotify, apparently, will not look to take ownership of the masters but will instead offer more favourable splits, with suggestions of 50/50 deals on streaming revenues being tabled. Billboard noted this was lower than the estimated 54% the majors currently get – but, for the artists anyway, this was demonstrably better given they ultimately receive anything from 20% to 50% of the labels’ 54%.
The advances as a sweetener – or, more likely, a rapid deforestation of the red tape around licensing – has echoes of what Facebook is reported to be offering labels to clear rights on music videos so that it can compete more directly with YouTube. Something, very clearly, is in the air.
Labels are not so concerned for now as such direct Spotify deals will really only work for those acts outside of the label system. But the bigger payoff – beyond the advance and better royalty rates – is what could be of most concern for labels and, equally, of most interest to songwriters if such a deal were to be extended beyond sound recordings to also cover publishing.
Spotify has been tight lipped on the deal terms (or even their existence), but it is not too far a stretch to suggest that there will be promotional incentives also being waved in front of managers’ eyes. This could see acts going direct pushed up major playlists and new music dropped into key tastemaker ones.
“Spotify has been tight lipped on the deal terms (or even their existence), but it is not too far a stretch to suggest that there will be promotional incentives also being waved in front of managers’ eyes.”
This will have huge implications not just for their profile but also for their potential earnings as a new study by the National Bureau of Economic Research in Cambridge, Massachusetts, suggests. It claims that a placement on the Spotify-owned Today’s Top Hits playlist – which at the time of the study had over 18.5m followers – could bump total plays by 20m and result in between $116,000 and $163,000 in increased revenue. Of course, it is unlikely Spotify will flood this flagship playlist with acts on direct deals; but placement on key indie or genre charts could drive a smaller, but not insignificant, bump in earnings. The gold is in the small print.
It does all tie into the service’s broader ambitions to be seen as an egalitarian platform and also a keen supporter of new music. Speaking at the Recode conference at the end of May this year, Spotify co-founder and CEO Daniel Ek said, “I still think that there’s huge inefficiencies when you think about how hard it is for artists to break through. The number one thing artists are asking for is [to] ‘help me find an audience’.” It is increasingly keen to be seen as more than just a revenue driver for mega acts: it also wants to be kingmaker for the new and the underground.
“Spotify is increasingly keen to be seen as more than just a revenue driver for mega acts: it also wants to be kingmaker for the new and the underground.”
This could be the next phase of Spotify helping artists to find their audience. It certainly would push Spotify into being something closer to SoundCloud. It might even be a replacement for that service given its current woes – becoming the key platform for grassroots and unsigned acts to upload their music directly to. It also would give it a boost at the precise moment where YouTube’s new subscription service has all the bragging rights on esoteric content that exists only on its platform, much of which has never been officially digitised or uploaded to the main audio DSPs.
On the negative side, doing such direct deals with one platform could run the risk of being blackballed by another service. Is it worth being backed by Spotify to be downranked by, say, Apple Music in its playlists (or even ignored completely)?
It all begs a bigger question: what would a similar model mean for publishing and helping writers go direct and find their audience?
In the US, mechanical royalties on Spotify are processed by the Harry Fox Agency but data gaps – as recent high-profile courts cases and expensive settlements show – remain growing pains for the main digital services in the world’s biggest music market. In short, a unified and watertight database matching composition rights to recorded rights does not exist and payments, as a result, fall through the cracks, are put on ice or are racked up without the requisite licence.
In doing a similar deal with independent songwriters, Spotify risks upsetting the major and independent publishers; but it could also start, at a very small level, to build its own rights matching database in house.
“In doing a similar deal with independent songwriters, Spotify could start, at a very small level, to build its own rights matching database in house.”
Thinking even further down the line, and this is potentially the biggest thing it could do for publishers, what could change everything is the creation of a dashboard just for writers. It already has Spotify For Artists, giving artists and their managers an analytics tool to help visualise the play, user and revenue data around their streams, removing many of the data dissection headaches for them; but building Spotify For Writers could change everything. It could be Spotify’s greatest gift to publishers.
“Building Spotify For Writers could change everything. It could be Spotify’s greatest gift to publishers.”
These are hypothetical baby steps and we should not get carried away, but Spotify went from being the enemy of labels and artists a few years ago to being their hero. It is still seen as problematic for some publishers and writers (see the above-mentioned lawsuits), but building a new-generation publishing database that actually works could be their peace offering to the publishing community. There are a lot of ifs here, but equally there is a lot of potential.
It is unlikely Spotify wants to become a label or a publisher (it stresses it is not signing up copyrights), but it clearly needs more new/unsigned acts on there to compete in catalogue diversity with YouTube and SoundCloud. It also needs to be seen to be proactively untangling some of the messy rights information holding back the business. Here are some ways for it to whip up some magic and to get publishers to more loudly cheer its name.