Spotify Gives Artists Another Way to Circumvent Record Labels

(Bloomberg) -- Spotify Technology SA is giving musicians new tools to release music without a record label.

The company said in a blog post Thursday it has invited a few hundred U.S.-based independent artists to upload their songs directly to the world’s most popular paid streaming service. A handful, including Chicago rapper Noname and Haitian DJ Michael Brun, have already tested the feature.

Giving artists the ability to submit music directly to Spotify reduces the need for a record label or third-party distributor, which take a cut of revenue. The move also helps Spotify deliver on its pledge to bypass intermediaries. The streaming service loses money in part because it must pay labels and other distributors a share of the revenue it collects from users.

Spotify Gives Artists Another Way to Circumvent Record Labels

The uploading feature is a new way to “encourage artists to release music on their own terms,” said Kene Anoliefo, who works on the Spotify team that builds tools for musicians.

The three major record companies either declined to comment or didn’t respond to phone calls about Spotify’s new feature, but the move is just another way in which the streaming service is competing with its biggest partners. Tension between rights holders and Spotify has intensified ahead of a new round of negotiations for music licenses.

The two sides are fighting over the spoils of a newly resurgent music business. U.S. music sales grew 10 percent in the first half of the year, according to the Recording Industry Association of America, and are on track for a fourth straight year of growth.

Streaming accounted for 75 percent of the sales -- and almost all of the growth. Sales of physical CDs declined by 42 percent in the first half of the year, while sales of music online fell by more than 25 percent.

“Music continues its comeback story,” Mitch Glazier, the president of the RIAA, said in the report.

Yet many musicians say they aren’t receiving enough of the spoils. Musicians have long relied on record labels to fund recording sessions, provide creative feedback, plan marketing campaigns and distribute music around the world. In exchange for that support, labels typically own the copyright to the work, giving artists a percentage of sales.

Spotify wants to push aside this system by creating a two-sided marketplace where artists and Spotify both receive a larger share of sales. Musicians who use the “Spotify For Artists” program can see how their music will appear in the app and track their royalties.

The company has said it doesn’t want to own any music and thus isn’t building a label, but it has begun to replicate some music company tasks such as funding large marketing campaigns and building tools for distribution. Spotify has also struck direct deals with artists, and, as mentioned in the blog post, allowed a handful of artists to release music on their own.

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