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Spotify is reportedly offering hefty advances to land more direct licensing deals

Spotify is reportedly offering advances to managers and indie artists as an incentive to consider direct licensing deals with the streaming service. Billboard reported that the company is offering up to several hundred thousand dollars in advances for managers that agree to license a particular number of tracks by indies directly to Spotify. On the platform, the managers and acts could then earn 50% of the revenue from those songs being streamed.

Working one-on-one with managers and artists has the benefit of cutting Spotify’s costs. Major record labels usually net 54% of the per-stream revenue compared with the 50% of these new offers, and Spotify’s licensing costs are one of its largest expenses. For artists and managers, direct licensing gives the option of negotiating other terms with other platforms.

Spotify isn’t the first to seek out direct licensing deals. Pandora in particular was aggressive in securing direct agreements with labels and publishers to support the launch of its on-demand subscription access tiers. But Spotify’s aim in this new endeavor appears to be working with indie acts and managers, all of whom fall outside the label system.

Any time a streaming service explores new layers in its relationships with other parties in the music industry, it raises questions of whether the company is looking to start functioning as a label. While direct licensing deals do echo some of the tasks shouldered by a label, Billboard notes that Spotify is actively blocked from encroaching too far into that territory. Its deals with the majors explicitly prohibit meaningful competition with those businesses. Different definitions of “meaningful” could certainly create legal questions for Spotify and the labels at some point as it explores new approaches for how to provide its core service and turn a profit. The trick will be finding answers that satisfy (and pay) all parties to their satisfaction.

Anna Washenko

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