Digital Gabe
Cutting Edge Commentary On All Things Media

Spotify Offering Indie Artists Cash Advances?

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In an interesting turn of events it appears Spotify is now offering upfront cash advances to the managers of Indie artists in return for reduced per play royalty costs.  This is basically the same thing as upfront minimum guarantees most streamers pay the labels for their artists’ performance rights.  By paying the managers directly Spotify can create a disincentive for Indie artists to sign with one of the three majors, which has the potential to upend the entire label business model.

On average the major labels keep 54% of the royalties paid on streamed music, with the remainder going to artists and their managers.  Bypassing the labels allows Spotify to pay less per song streamed while still giving the artists and managers more total money, because there’s one less middleman to pay.  Obviously this move won’t work for established artists who are currently under label contract.  Nor will it work for no-name artists who won’t get enough plays to make a deal worthwhile.  That leaves the middle tier of well-known Indie artists who can command guaranteed money upfront without having to run a deal through their label masters.

It’ll be interesting to see if this model starts to gain traction.  I’m sure Sony, Warner and Universal will be keeping a close eye on this one.

 

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