Why Did Spotify Cut Out the Middle Man and How Will it Affect Indie Artists?
In late September of this year Spotify announced their new beta feature that will allow a few select indie artists to upload their music free of charge directly to their platform in the same way that labels and 3rd party distributors like Tunecore can. While that's great news.... I still have to ask "but why?"
According to The Verge, Spotify feels the feature will be a great way for artists to have more control over their music before it's even released. Spotify isn't trying to become the NEW SoundCloud as the artists won't be able to release the music the same day they upload it. Forbes however, feels there is more to the story alleging it could be a strategic move against competitors who won't offer indie artists the same feature - giving Spotify the advantage of offering music to their subscribers that won't be available on their competitors platforms.
Spotify also told The Verge that it will offer the beta artists 50% of Spotify's net revenue an 100% royalties for these direct uploads giving these artists no reason to look for a label or publisher. I understand why that works for the artist but here's my take on why it works better for Spotify.
When it comes to streaming payouts according to digitalmusicnews.com, Spotify came in 8th place getting beat out by Napster, Tidal, Apple, Amazon, Google Play just to name a few. Spotify hasn't always had the best legal track record with the music industry's advocates either so getting permissions and uploads straight from the artist eliminates certain legal hangups.
Last summer USA Today reported that publishers Bluewater Music Services and Bob Gaudio, sued Spotify for streaming songs without obtaining the appropriate licenses shortly after the NMPA settlement with Spotify for $30 million, and Lowery’s class-action suit for $43 million, but what percentage of that went to the artists? Billboard reported last April that Spotify's agreement with Universal is around 52% of which they deduct their own costs and give the artist what is left over. This is part of why my theory is Spotify just tired of paying the middle man.
Let me paint a better picture of the artist cut for the artists NOT in this beta group. Spotify pays between .006 to .0084 per stream to the music rights holder first, who then splits it between the label, producers, artists, songwriters, etc. In a curated scoop I wrote on streaming, The New Yorker reported a royalty breakdown of what singer and songwriter Michelle Lewis received after her hit song "Wings" was streamed 3 million times, resulting in a $17 check.
Why would Spotify continue paying millions of dollars to industry execs who barely want to give the very artists they suit on behalf of at least a whole twenty dollar bill - just doesn't add up. Is Spotify doing something to increase pay for the indie or to decrease legal repercussions for themselves? Who knows for sure?