Spotify starts signing artists directly

It was inevitable, but record labels hoped it wouldn't happen: Spotify has started secretly signing direct deals with artists, making an end run around the labels entirely for the first time. 

Here's how it works: Spotify signs a smaller artist, with an advance payment and the promise of amplification on its platform. Even more interesting is that Spotify's deals are not exclusive -- so they're able to try and get cash from other platforms at the same time, and even retain the ownership rights of their tracks.

183 million people listen on Spotify every month, making these deals a huge opportunity: work with Spotify, and they'll try help make you big. The labels will try to do the same, albeit without the promise of this scale of reach, just marketing assistance.

As you'd expect, this is a dangerous game. The labels still hold the majority of the power, and could choose to punish the company, as the report from The New York Times points out:

Through anonymous comments in news articles, music executives have indicated that they could punish Spotify by withholding the licenses the company needs to expand to India. The labels have also suggested they will be unwilling to compromise with Spotify as its contracts with the labels expire over the next year.

In my mind, doing these deals is an act of self-preservation, and something the company must do if it wishes to survive. Long term, the labels are simply too expensive to license, which was revealed in Spotify's IPO filings. The only way to fix that is by removing that factor in the future, which is why these bets are restricted to independent artists, assumably, as a longer play.

Music is a strange industry that's largely been rewarded by streaming services, which have stamped out privacy by making it easily accessible, but labels still retain so much power over who gets what music. 

It's hard to know what will happen three years out, but with Apple, Amazon, and many others grappling for a piece of the streaming pie, it's only a matter of time until the labels will fade in relevancy as artists choose to go directly to the listeners, or work with the platforms.

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