Despite complaints from artists about meager royalty payments, Spotify is approaching them and the record companies for a new stream of advertising revenue. In order to support profitability, the streaming company identified artists and music labels to foot the bill in exchange for advertising their songs on the Spotify app. As deals are made with big players in the industry, the discovery of smaller labels and artists will suffer greatly, according to Daryl Friedman, head of industry, government and membership relations at the Recording Academy.
“It’s a bad idea for artists, for fans – and in the long run – for Spotify,” says Friedman.
The new effort requires artists to pay Spotify additional dollars for their exhibition, which further reduces their royalties, Friedman says. While major labels may choose to engage in the deal, independent labels and artists may not be able to afford it, reducing the overall amount of music played on Spotify. In the long run, fans will suffer from downsizing Spotify playlists, he says.
In 2018, Spotify announced that it do not allow payola to dictate the formation of its playlists, a tactic radio stations were known to entertain in the past. Making its playlist curation process more transparent meant that while the platform allows artists and labels to submit songs for inclusion in a playlist, no payment will be accepted to ensure the song is added.
As Spotify continues to lagging behind its competitors In advertising revenue, the company is investigating whether podcasts and its new paid promotions will become lucrative ways to strengthen bonds between artists and fans. Last year, Spotify explored a new form of fan engagement with the beta launch of Marquee, a marketing tool giving artist teams the ability to engage with fans using full-screen “flagship” album recommendations on Spotify. The tool introduced a broader scope than previous recommendations that were determined by the platform.
Older Spotify services, including one that allowed artists to upload songs directly to the platform, have not been well received by major labels Sony Music Entertainment, Universal Music.
“Every day I hear artists tell me that they get millions of streams but low royalties of around $ 100. It’s really (Spotify’s) obligation to pay the artist, ”says Friedman, who adds that radio stations, on the other hand, don’t pay any royalties to creators or record companies. “Spotify is better than zero, and radio is worth zero.”