Spotify’s Direct Deals With Some Artists Stirs Up Music Industry

September 7, 2018 Updated: September 7, 2018

Popular music streaming service Spotify has been making deals with independent musicians, bypassing big labels such as Sony, Warner, and Universal, which now control about 80 percent of the market, according to reports.

Music Streaming Service Spotify Goes Public On The New York Stock Exchange
People walk by the New York Stock Exchange (NYSE) on the morning that the music streaming service Spotify begins trading shares at the NYSE in New York City on April 3, 2018. (Spencer Platt/Getty Images)

The streaming giant’s direct deals have only been made with a small number of independent artists, with Spotify giving them tens or hundreds of thousands of dollars in advance, according to New York Times.

Even with such payments, the agreements could reportedly help Spotify cut costs.

The deals also give these independent artists a larger portion of revenue from streaming and complete control over their music. In addition, it leaves the artists open to make any deals with other music service providers such as Apple Music.

Barbar Zafar, Spotify VP of Product Development, speaks during a Spotify announcement in New York on April 24, 2018. (Don EMMERT/ AFP/ Getty Images)

Spotify pays around 52 percent of the revenue from streaming to record labels, reported NYT, and the label in turn pays the artists around 15 percent to 50 percent of that. But the artists and their representatives who have signed direct deals with Spotify keep the whole payout.

The streaming service is not the first company to make such deals. SiriusXM has also made licensing agreements with independent labels, according to Billboard.

However, Spotify, which went public in April, could be at risk of disrupting its relationships with major labels through these licensing deals. The company’s contracts with all three major music labels expire in less than 12 months, while the music service has consistently reported net losses in revenue.