As Spotify struggles to turn a profit alongside many of its streaming competitors, its move to become a more broad-based streaming media platform could be its saviour as negotiations with rights holders heat up.
Spotify pays 70% of its revenue from major label music to rights holders, but that isn’t the case when it comes to its extended content types like video and podcasts.
Podcast ad revenue can be split with partners; Spotify’s current podcast partners include Viacom, Vice Media, Nerdist, Condé Nast Entertainment, NBC, BBC, Slate, Harper Collins, Blucora Media and Conan O’Brien’s TeamCoco. Hosting podcasts also means Spotify avoids having to pay expensive royalties and advances.
What’s more, Spotify’s multi-media content strategy – which keeps users tuned in and distracted from Apple’s exclusive-heavy features – means it will eventually pay a smaller share of its revenue to rights holders. Content like its upcoming music-themes video series, which consists of original programs like Trading Playlists, Drawn & Recorded and Rush Hour, will see Spotify become a hot contender in the streaming space.
Original video content is also a weighty rebuttal to the argument around artist release ‘exclusives’. Chance The Rapper revealed he was paid US$500,000 by Apple Music for his two-week Coloring Book exclusive and an Apple commercial. Meanwhile, Spotify’s response is to align with artists in a way that doesn’t harm the market.
Crucially, though, Spotify is a better position than ever to renegotiate its licensing deals and prep its rumoured IPO.
With 50 million paid subscribers, a platform which promotes music discovery, multiple incentives to push merch and ticket sales, and possible label-type artist deals on the way, Spotify is in a good position to negotiate lower royalty rates. But with the label and publishing sector still at odds with its ad-supported free tier, we’re likely to see a compromise backed by a financial incentive.