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Spotify has approached a number of indie artists and offered them advances in exchange for direct licensing deals.
Spotify has approached artists with an offer of an advance in exchange for licensing tracks directly to the service, rather than via a label or distributor. According to Billboard, sources suggest that the streaming giant has offered advances of up to a few hundred thousand dollars.
Spotify’s direct licensing deals with artists would see them pay royalties directly to the artist, with a lower revenue share rate than under a traditional distributor or label agreement. In practice, this means that the artists will be self-releasing tracks and will license the recordings to Spotify at a reduced rate, but will still own the recording rights. It is important to note that the artist would not be signed to the service, largely because Spotify will not want to sever ties with its label partners.
Spotify and Apple Music are looking to reduce their royalty costs
By effectively cutting out the label or distributor, despite being paid a lower royalty rate, the artist could receive a higher overall rate. With the benefit of a Spotify advance, the artist can still license their music to other streaming platforms and have the financial strength to negotiate a better deal. The advance could also be particularly useful to fund further marketing and label services.
This news comes after Apple announced that they are launching a new publishing division at Apple Music. With this considered, it is clear that the streaming leaders are looking at strategies to reduce their royalty costs and further develop their artist relation strategies.