The new plan complicates the app’s relationship with record companies.
The streaming era has already changed the way musicians and labels approach music. Streaming giant Spotify is taking things a step further.
Recently, the platform introduced Marquee, a tool that notifies fans when their favorite artists release new music. According to multiple sources, Spotify has also pitched a paid promotion plan for artists and record labels.
“They need to diversify their revenue streams,” industry analyst Mark Mulligan told Bloomberg News. “They need to work out ways to drive higher operating margins.”
Megastars like Lil Wayne and Justin Bieber already use the Marquee tool. For a minimum of $5,000, the platform will insert sponsored songs in their popular playlists. According to the Bloomberg News report, the company has also discussed the idea of charging artists and labels for data regarding their listeners.
The current royalty system gives record companies a share of their artists’ Spotify revenue. Should the new plan take effect, the platform would pool millions without having to split the money. Despite its popularity, the company’s competitors of similar stature dwarf its recent revenue.
Understandably, smaller record labels don’t love the idea. Richard James Burgess is the head of A2IM, an organization that represents independent labels. In the Bloomberg News report, he says the new plan would only benefit major labels.
“People aren’t very happy about it,” he said. “Some labels feel like they’d promote music to people they will reach anyways, and it just reduces the royalty you make.”
SOURCE: Bloomberg News