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How Spotify’s bypassing of labels will change the industry

As things stand in the world of music streaming, Spotify gets almost all of its music by cutting deals with the music labels, which have cut their own deals with musicians. But now, Spotify is starting to cut out the middle man. The music streaming giant has started licensing some songs directly from artists and their managers, paying advances of “several hundred thousand dollars” for a collection of tracks. The upside for Spotify is that after cutting an initial check, it then pays the artists a slightly lower royalty rate than it pays the labels. The upside for the artists and their managers: They get to keep all of the royalties instead of watching the majority of that money go to a music label. Despite what they say on the matter, Spotify is competing with the labels, by offering artists a chance to make more money by selling their music to Spotify instead of a traditional label. This is also what Spotify said it would do in advance of this year’s public offering. Spotify didn’t say that out loud, for obvious reasons — it still needs to work with music labels, and if Spotify takes them on directly, the labels will go apoplectic. Bypassing labels Spotify does imagine, however, that over time, a growing tier of music acts, or small independent labels, […]

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