Spotify will now offer independent artists advances to license their music, here’s everything you need to know 

Spotify have announced that they will offer managers and artists advances if they licence their music directly to the streaming service instead of using a third-party distribution service.

Billboard released a report which states Spotify will offer advances worth as much as ‘several hundred thousand dollars as an advance fee for agreeing to licence a certain number of tracks by their independent acts directly to Spotify’.

Here, Plugsville breaks down everything you need to know about Spotify’s licensing deal and what it could mean for independent artists.


How does the deal work?

As well as receiving as much as several hundred thousand dollars via a licensing fee, Billboard’s report details how managers and acts could earn as much as 50 percent of the revenue per stream, around 4% less than the revenue that third-party outlets, such as major record labels, and distributors like TuneCore, receive per stream.

The streaming giants made $4.7 billion in revenue in 2017 but suffered a loss of $470m, so the new licensing deal is presumably a move aimed at trimming costs.

Another fact to consider is that managers and artists usually receive between 20 and 50 percent of the record label’s streaming revenue, so this could prove most lucrative for independent artists with fewer financial restrictions tied to their music.

By the same logic, a record label can help to boost an artist profiles to create a situation where 20-50% of the label’s streaming cut is worth more than going 50/50 with Spotify and trying to amass huge streaming huge numbers as an independent artist.


Are Spotify now a record label?

Spotify will not operate as a label, as the acts will still own the copyright to their music.

It’s also believed that the Spotify’s licensing deal may be more suited to smaller independent artists, as labels have an agreement in place with Spotify which prevents them from competing in a substantial way that would impact a label’s main business.

Spotify have stressed that an artist would not be signed to the streaming service. The licensing deal would allow Spotify to pay a lower revenue share than they would to a record label. This could be as much as 4% less, which translates to a lot of money where millions of streams are conncerned.

With a library of over 30 million songs and around 20,000 new songs added daily, there certain exists a large pool of potential suitors.


Did Spotify learn something from Apple’s decision to scale back on exclusives?

Apple Music signed a host of big artists to short-term licensing deals similar to what Spotify are offering, including Drake, Frank Ocean and Chance the Rapper, but have since scaled back.

For example, Views, Drake’s fifth studio album, was an Apple Music exclusive and amassed over 250 million streams on the platform in its first week. The Canadian has since released a number of exclusive singles and albums on Apple Music since its launch in 2015. He also premieres new cuts on ‘OVO Sound Radio’, the Beats 1-fuelled show, which according to Jimmy Iovine, is a radio show that ‘does TV numbers’.

Much like Beats 1, exclusive releases are a big reason why Apple Music has been able to accumulate over 30 million paid subscribers, around half the number Spotify has, despite operating for nine fewer years.

But Apple Music has since scaled back, as labels dislike exclusive releases, because it’s more profitable for labels to secure maximum exposure from a release across all streaming platforms instead of being exclusively tied to one. Spotify’s licensing agreement stresses that artists are free to stream their music on other platforms as well.


How could Spotify’s deal help independent artists?

Spotify’s deal suggests that they wouldn’t need an artist to commit to exclusive releases. This could be particularly useful when new viral songs emerge from unsigned artists. Instead of artists signing quick deals, they could, in theory, licence their music to Spotify and receive a higher percentage of streaming revenue than they would if they were signed.

Supposing an artist did sign a licensing deal with Spotify, they would still be free to stream their music elsewhere, but because Spotify have paid them a set fee, it would be in the companies best interest to ensure that body of work receives the most streams possible.

The accumulative streaming income and licensing fee received could potentially make it more lucrative for independent acts to take this route, instead of signing a short-term record label, for example, a single or one-album deal. If a track does take off on Spotify, it’s likely to more revenue too, for example, from album sales or streaming revenue from other platforms.

Spotify is now said to have around 70 million paying subscribers, around twice as many as rivals Apple Music, while the percentage of customers cancelling their subscription has decreased since 2015. Those statistics would suggest that Spotify is considerably bigger than Apple Music and is trending towards putting further room between the two streaming giants.

Independent artists now have another option to elevate their standing their significantly with the help Spotify’s ever-growing fan-base.

To read about why more about why more YouTube platforms should make their music available for streaming, click here.