Over the past year, Spotify, which recently captured the title of first streaming service to reach 100 million paid subscribers, has been experimenting with a new approach that could potentially reshuffle the power structure of the music business. The 12-year old company has reportedly struck direct one-on-one licensing deals with a number of independent artists, a move that grants these artists easy access to the platform and it’s flagship tastemaking playlists while bypassing major record labels. This avant-garde, if risky, entry into the talent marketplace, augmented by the fact that the deals are not exclusive, means that artists and their representatives are able to keep the whole payout, as opposed to having to share a massive chunk of streaming revenue with a label. Daniel Ek, Spotify’s chief executive, has stressed that the streaming platform is not turning into a record label. “Licensing content does not make us a label, nor do we have any interest in becoming a label,” he said during an earnings call in July 2018. “We don’t own any rights to any music, and we’re not acting like a record label.”
Ultimately, the decision to forge closer relationships with artists could prove to be disastrous given that the Big Three (Universal, Sony, and Warner) control 80% of the market. From a more immediate standpoint, antagonizing the labels that Spotify depends on could have an impact going into renewal talks later this year. One US-based source at a major record company was particularly blunt about such pain-points in a quote given to Music Business Worldwide: “Over the last six months, trust has eroded and (Spotify) have started doing things which seem blatantly out to get us. They’re valued at a multiple which is much higher than any major label today; perhaps it’s now time for us to start clawing that margin back.”
With streaming now the most popular listening format, Spotify has the most to gain, and arguably most to lose. Its plans to change the “old model” of the music industry and “usher in a new era that would help new artists break through more easily” is emblematic of the times. For years, artists have been pining for greater leverage, which is why Spotify’s decision could finally tip the scales in artists’ favor and foreshadow the future dynamic of music’s expanding do-it-yourself landscape. It’s 2017 acquisition of cloud-based recording and production studio Soundtrap is yet another move that is in line with its vision of “democratizing the music ecosystem,” and its desire to cultivate deeper relationships within the artist community. Although rivals Amazon, Apple, and Google are gaining ground, Spotify might be the best positioned to expand “beyond distribution into creative, marketing and rights management offerings.”
Steve Stoute with Kanye West & Jay-Z - Larry Busacca/Getty Images
Streaming’s versatility as an entry point for music discovery and audience development is something that the indie community has become particularly attuned to as of late, as evidenced by the emergence of platforms like United Masters. Founded by former Interscope Records president Steve Stoute, the pioneering startup is built to be a direct competitor to traditional record labels. For a fee, it provides artists with distribution, pinpointed marketing coaching, and personalized analytics to help them connect with their target audience, while also allowing them to maintain full ownership of their master recordings. In a lengthy interview with VIBE, Stoute was adamant about “(operationalizing) independence” in order to jumpstart and build legitimate careers for “250,000 Chance the Rappers”: “I think that independent artists have an opportunity to be heard…(they’re) the next great creators of our generation.”
United Masters’ attractive partner model, aided by $70 million in funding and a multi-year global partnership with the NBA, professes the ability to free artists from the shackles of an “outdated, centralized owner.” Regardless, they’ll face a tough road ahead if they hope to stay competitive in the saturated music streaming, distribution, and analytics landscape. According to a 2017 report published by Citigroup, artists took home a meager 12% of the $45 billion in revenue that the music industry generated. The majority was reportedly captured by middlemen, including tech companies, radio stations, and record labels. Although the 12% figure is actually slightly higher than it was for artists in previous years, it points to a fundamental problem with the way that revenue is allocated and circulated.
Direct deals aren’t new for digital distributors. However, the way that Spotify and United Masters are incentivizing artistic independence, particularly their emphasis on allowing artists to retain ownership of their masters, could prove to be the biggest (and most valuable) piece of the current streaming puzzle. It’s a notoriously complicated relationship in which many streaming services are at the mercy of record labels. As such, artists end up being the ones who suffer. Young Dolph reportedly turned down a $22 million deal for fear of “signing his life away,” while others like Lil Uzi Vert have been forced to contend with the whims of their non compliant labels. Even mainstream mainstays like Pharrell have received paltry royalty checks for their work. The harsh reality of the industry’s less than opaque pie chart has made it difficult for musicians to demand a fairer system of pay and ownership.
Hip hop has experienced a signing frenzy over the past five plus years that is largely the product of increasing exposure and ease of access, both of which have significantly lowered the entry barrier. But getting signed isn’t always a golden ticket so much as it is “a cash advance, a leash, and a sliver of the revenue.” For unsigned artists, the fork in the road is clouded in uncertainty. On one hand, a licensing agreement with a top-tier streaming competitor like Spotify could potentially mean more money in their pockets down the line. On the other hand, inking a record deal in many ways still feels like an imperative in order to access the resources required to start generating revenue in the first place. Promising young acts get so caught up with chasing a deal that they lose track of the larger goal: building a sustainable career that allows them to be in control of their creative and financial future.
The choice to stay independent versus sign a record deal is a good one to have; there’s no denying that the right label can do wonders for an artist. Unfortunately, this career-defining decision remains unbalanced. When Prince scrawled “slave” across his cheek in 1993 during his war with Warner, it was more than just a political gesture meant to warn young artists about the exploitative greed of corporate contracts; it represented a change in the idea of artistic control. In positioning themselves as indispensable advocates and growth drivers, platforms like Spotify and United Masters have (for now) allied themselves with artist interests. Their respective in-house R&D strategies aim to arm talent with the know-how to remain independent by providing a singular and comprehensive data source for artists and managers to analyze. As more vertically-integrated avenues such as this open up, staying independent will likely become more viable and more lucrative.
Chance the Rapper attends WE Day California, 2019 - Emma McIntyre/Getty Images
In some small ways, the qualitative “it” factors that make discovering new music such a visceral experience have been enhanced rather than diminished by algorithm-curated culture. For all the unsettling tales of commodified results from Moneyball formulas, and artists being shelved and extorted, the intangibles that make artists click with listeners are still connecting, and they’re doing so on an even bigger scale than previously imaginable. The narrative that artists need to be “put on” in order to achieve success is one that independents like Chance the Rapper have fiercely railed against for years. “I’ve met with every A&R, VP of A&R, president of the labels, CEOs. I know all these people,” Chance told The Fader in 2015. He turned them all down, and has been handsomely rewarded for his efforts: Coloring Book, his wildly successful third mixtape, received widespread critical acclaim and was nominated for a whopping seven Grammy Awards, of which it won three. He even claims to have made $6 million from his signature “Chance 3” hats.
Frank Ocean is another artist who earned a substantial pay raise by going independent. According to Forbes, Ocean maneuvered his way out his contract with former publisher Def Jam and its parent company Universal by releasing Endless, a 45-minute visual album that fulfilled his contractual obligations. The move paved the way for him to drop Blonde on his independent label Boys Don’t Cry. In choosing to cut ties and go with an Apple Exclusive release, Ocean more than doubled his profit and set the internet aflame in the process.
Frank Ocean at Paris Fashion Week, 2019 - Pascal Le Segretain/Getty Images
Even as labels ride out their status as the sole proprietors of hefty catalogues, the winds of change are growing stronger. Of course, one major indie release isn’t going to topple the status quo; both Chance and Ocean have openly acknowledged that their independence is only possible through loyal fan bases that understand how the system works and are willing to support them by purchasing concert tickets and merchandise. For artists coming from the teeming underground, maintaining independence isn’t universally realistic, but it’s certainly more of an attainable reality than it was in the past.
To think that even the most outwardly altruistic players won’t allow modernity’s infatuation with “Big Data” to define their actions behind-the-scenes is naive. That being said, Spotify and United Masters’ willingness to stir the pot gives hope to blossoming artists that aren’t buoyed by the hard ones and zeros of a major label. Detailed breakdowns and segmentations of fans are not novel concepts, but they are being put to use in a more digestible and actionable manner. In the end, it’s not too far fetched to think that one of the two platforms could eventually link with more established artists who are ready to bet on their long-term potential and retain control of their original recordings.
We’ve entered an era in which technology and music are bedfellows, a revived romance that not too long ago seemed impossible to rekindle after the industry was gutted by piracy. With data literacy on the rise and artists increasingly warming up to the idea of streaming, it will be up to these purveyors of new music and emerging trends to continue to usher in the indisputable paradigm shift. Spotify and United Masters’ aggressiveness in the market could stand to level the playing field of the music business, one that has long suffered from a top-heavy aristocracy unwilling to cede jurisdiction. The rising tide of dissatisfaction bred from years of inequality just might lead to changes that will be good for all, or at the very least break new ground that musical entrepreneurs everywhere can stand to benefit from.