Spotify has offered advances to a number of managers and indie acts in exchange for licensing their music directly to the streaming service, according to a report in Billboard. A rep for Spotify declined Variety’s request for comment.
While the practice in theory is nothing new — many artists deal directly with streaming services — the report, which names no artists or management companies, claims that some management firms can receive as much as several hundred thousand dollars as an advance fee for agreeing to license a certain number of tracks by their independent acts directly to Spotify. In some cases this can bring in 50 percent of the revenue per stream on those songs directly to the artist and/or manager. This is slightly less than the estimated 54 percent the major record labels in the U.S. receive on average, but major-label artists and their managers typically receive just a percentage of the label’s share.
While this does not mean that Spotify is becoming a record label — at least, not drastically more than it is already acting as one, via its alleged “fake artists” enterprise and other efforts — it does point to yet another way the service is looking to maximize its take. The company’s operating losses were around $461.2 million last year and $425 million in 2016, and shows no sign of making a profit anytime soon, and it’s widely known that as its subscription base grows, the labels’ percentage will grow. Thus, the company needs to find new revenue streams that can work within its existing structure, which has a variety of provisions that prevent it from competing directly with major labels (boundaries that the company frequently tests, sources say).
This one, if true, would be appealing not only because it’s a straight license — Spotify would take no ownership of the masters — and also because it’s non-exclusive and even more appealing than a distribution deal because it leaves the artist free to negotiate deals with other streaming services.