Spotify Might be Squeezing Traditional Labels with Direct Artist Deals

Spotify is making a big move into direct artist deals, a potentially serious strike against traditional labels.  That includes the big three majors, with third-party distribution services like CD Baby and Tunecore also potentially threatened.

This has been a lingering threat for artist distributors since the heyday of iTunes Music.  But Apple never offered to work directly with the millions of artists using services like Tunecore to distribute their works.

Now, the biggest player in the music game is Spotify, not iTunes.  And it looks like Spotify is moving into direct licensing and distribution.

Billboard’s Hannah Karp just broke the story that the streaming giant is floating initial offers to select independent artists and management groups.  The overtures are being made to popular independent acts, specifically those that aren’t signed to a label and are likely using services like Tunecore or other distributors.

Instead of working through a third party, Spotify may also be offering to ingest these artists’ tracks directly, and give them a bigger cut.  At this stage, everything is preliminary — and involves a small group of artists.  So let’s see where this goes — but distributors are undoubtedly watching this development very, very closely.

At the same time, indie labels may also find themselves muscled out by this (more on that below).

Apparently Spotify is putting some serious money on the table for certain artists.

“Under the terms of some of the deals, management firms can receive several hundred thousand dollars as an advance fee for agreeing to license a certain number of tracks by their independent acts directly to Spotify,” Billboard says.

The deals also apparently give artists a clean 50 percent revenue cut.

That’s substantially lower than what Spotify pays major labels, depending on how publishing is factored into the equation.  But major label artists rarely receive substantial percentages of streaming revenues anyway.  The advances would also be substantially smaller, for obvious reasons.

Then again, these aren’t major-signed artists that Spotify is courting, so perhaps the comparison is misplaced.  But right off the bat, these artists may be able to eliminate their payments to distributors like CD Baby.  Depending on the distributor, artists typically pay an upfront fee, a percentage of downstream revenues, or both.

We’re not sure how indie labels fit into this.  But it looks like the initial targets are label unaffiliated.

Also — and this part is critical — Spotify isn’t floating exclusive deals, according to Karp.  They’re even insisting that these aren’t ‘signings,’ lest they piss off critical label partners.  Accordingly, artists who partner with Spotify will retain their copyrights, and the ability to distribute, partner and join other platforms and distributors.

Then again, a direct deal with Spotify could seriously discourage an artist from signing with an indie label.

And the reason is pretty simple.  Instead of an indie getting the advance payment, Spotify is now willing to pay the artist and their managers directly.  “While Spotify has long executed a range of deals with indie labels of all sizes, the current offerings to managers could incentivize them to keep their new acts independent of any label,” Billboard noted.

All of which may have an impact on Apple Music.  Just recently, Apple created a music publishing unit, while also releasing a slick artist analytics platform.  Maybe some juicy artist deals are next.



8 Responses

  1. dhenn

    None of these clowns should be in the publishing biz. It’s certainly not going to benefit artists. If it did, they wouldn’t be getting into it!

  2. Anonymous

    It looks like indie artists would still need distributors like CD Baby and Tunecore to get their music on other services (Apple, Amazon, Pandora, Tidal, etc.). This will hurt the distributors a bit, as they won’t be able to share in the downstream Spotify revenue. But I don’t think indie artists would want to limit their music to one service, even if it’s the biggest one.

    Also, a tip to Spotify… when you sign these guys up, ask for their publishing info and get the mechanical licensing squared away ahead of time. I know we got MMA coming up, but it’s still a good idea. Could use it as a selling point even.

    • Paul Resnikoff

      Keep in mind that Spotify has acquired Loudr. So that task is now easier than ever. Even better: Spotify could use Loudr to require all future uploading artists to supply proper mechanical licensing info – while asking current artists to add to their rights data.

    • Rick

      the new Monopoly Spotify
      will work sweetheart deals for
      its. ‘special’ artists after cementing a star chamber deal to pay .000001 per stream to
      indie artists?
      Do you expect a Swiss monopoly
      to be open and transparent
      as they laugh all the way to the bank?
      Their backroom Star chamber deals with Harry Fox and Tuneporn notwithstanding who is fighting for the little guy? NOBODY

  3. Robbie


    The article mentions advances of hundreds of thousands of dollars in some cases so they are not targeting Tunecore and CD Baby types. They are going after artists at the higher end of the distributor scale ala Caroline, The Orchard and their ilk. Those distributors who have a weak value proposition, if you remove their ability to service your music to Spotify.

  4. Art Smith

    I Just Mention To My Wife Koffey and Our Son Yung Giant About Their CD Dropping This 2018 Summer…Worldwide The Is The Greatest Time For An Indie Hip/Hop Artist! So Many Bigtime Things Are Creatively Happen For Serious Artist!

  5. Blobbo

    Spotify already has a reputation for not paying indies fairly? Why would anyone put ANY MBA content ripoff middleman between their fans and their own bank account? Spotify of course will favor the people they’ve signed. This is just another mega labal. WHen will artists wake up and stop taking these sheit deals?