In order to make up for lost revenue, Spotify is requesting money from artists and labels in order to promote their music inside the streaming app.
There’s no denying that streaming giant Spotify has been hugely impactful on the music industry, and in recent months has begun to branch out into various other sectors that could boost the revenue and popularity of the service – specifically, opening up to the realm of original podcasts – which the company has named as one of two priorities: the second being a “two-sided marketplace”, which focuses on advertisement and music tools.
A new report by Bloomberg has stated that Spotify is addressing a new, somewhat controversial approach in a bid to raise and secure revenue for the company: according to the report, Spotify generated $6.1 billion in sales in 2019, however the majority of the revenue reverts into royalties that go back to the music industry – causing the company to ultimately lose money.
The latest approach to boosting revenue and satisfying investors comes in terms of pitching that artists and labels to pay for advertisements – allowing them to have releases widely promoted within the app, in order to increase exposure and ultimately attract a wider fanbase. Spotify already offers a service entitled ‘Marquee’ – which allows users to notify listeners on the platform when new content or albums have been released as well as sponsoring tracks in subscriber’s playlists. In order to use Marquee, an artist or label must pay a minimum of $5,000 in order to promote their albums when they release on the service.
Spotify has been a major player in assisting indie labels and artists in promoting their music in recent years, however the streaming service has begun to pull back – after initially offering a much welcomed service that allowed independent musicians to upload their work onto the platform, the company quickly pulled the feature after facing backlash from label giants such as Warner, Sony and Universal who stand as their key suppliers.
There are concerns that the new bid for paid promotions will alienate smaller labels and independent artists who have gained higher market shares due to the service, as more prominent artists and labels have more money to compete and dominate. Richard James Burgess, head of A2IM – a body representing independent labels stated:
“People aren’t very happy about it…
Some labels feel like they’d promote music to people they will reach anyways, and it just reduces the royalty you make.”
For more information, read the full report by Bloomberg
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