Situation: Spotify concludes direct deals with musicians - labels are unhappy with
Streaming service Spotify in the beginning of summer stated about their plans to pay musicians directly, "bypassing" the labels. This caused dissatisfaction with the record companies.
More details about the conflict, its causes and consequences for Spotify - we tell by cat.
Photo Andrew Mager / CC
In Spotify suggested significant amounts of performers in exchange for direct licensing of their music. The fees for these transactions are hundreds of thousands of dollars.
Spotify's revenue in 2017 was four billion euros, but the service is still remains unprofitable . Therefore, the new business model is a good opportunity to correct the situation.
Today, half of each dollar earned by the site goes to record companies, and another quarter is taken by the performer himself. Working with musicians directly, the company hopes to save on payments to labels and increase its revenues.
Opinion of indie labels
The statements of the streaming company about direct licensing caused a negative reaction among many independent labels . By words one of the representatives of indie label, such companies strongly depend on income from streaming, but do not have leverage on Spotify.
Spotify has access to data that labels do not possess, which also gives the streaming service an advantage. Based on this, the service can make business decisions (invest in musicians), based not on assumptions, but on specific facts - statistics on the auditions of certain compositions. Independent labels believe that if they do not continue to have access to this information, the situation on the market will only worsen.
There is another strong point of Spotify is that the streaming platform is does not require exclusive rights to music that is licensed. Performers retain the opportunity to sell their works at other venues owned by Apple , Google, etc.
Working with streaming platforms and receiving payments from auditions are one of the main sources of income for indie labels. Therefore, direct transactions Spotify with musicians threaten to make the existence of the latter virtually meaningless.
Conflict with the big three
The rights to most of the compositions of the performers represented on Spotify, belong to Warner, Sony and Universal. Now they get more than half of the proceeds for each song they listen to (the rights they have). In 2017 during the negotiations the streaming service succeeded agree on on the reduction of payments, but according to the assumptions of some sources, the average percentage decreased from 55% to just 52%. At the same time, labels have made it clear that this is all the indulgences for streaming service will end. They are not satisfied with the policy of "direct transactions", therefore, when contracts are renewed in the next year, "benefits" will no longer be.
Photo PxHere /PD
Direct deals are not the first action of the service, which caused the label's displeasure. In July last year, the publication The Vulture suggested , that Spotify pays little-known musicians for the creation of tracks (without vocals), which the site includes in its thematic Playlists (jazz, piano, music for relaxation and so on).
Spotify they are needed to expand the library and raise activity on the site. However, a large number of "cheap" tracks "clogs" the playlists, and other musicians remain out of sight of the listener. The result is a reduction in payments to labels due to fewer auditions. On the other hand, the site itself is refuted this state of affairs .
As the music news portal Music Business Worldwide (MBW) notes, the major labels are preparing a series of measures against Spotify. And already now the big three, having a huge impact on the music industry, prevents Spotify from entering the markets of individual countries.
At the beginning of the month it became known that the launch of Spotify in India, which was to take place this summer, was postponed indefinitely. Warner, Sony and Universal refused to grant a license for their music to launch a streaming service. All this can create problems when entering the markets of other countries: Russia, South Korea, African countries.
Spotify 3 r3r3178 were collected. Start the service in Russia in 2015. But then these plans were suspended for economic reasons. In March this year, Daniel Eck during the company's annual conference again
stated about the readiness to go to the Russian market . But while streaming service does not agree with the labels, this initiative is under threat.
According to the representative of one of the recording studios, they already have several strong partners in all these markets: "The task of Spotify is to convince us to help them. While we are not sure that we should do this. " It is unclear what will end the confrontation between Spotify and the labels.
The denouement of history can be expected next year, when Strimming service will re-sign contracts with Warner, Sony and Universal.
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