It was a bold move, but Spotify puts an end to indie artists
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It was a bold move, but Spotify puts an end to indie artists

Music streaming market leader Spotify has officially announced the end of its experiment with independent artists. The company has previously allowed unsigned artists to upload music directly onto its platform in exchange for 50% pf the revenue – that’s a fair chunk of earnings, but significantly less than the 70% it currently pays the major music labels. CEO Daniel Ek billed this bold move as a major disruptor for the music industry, telling investors: “the old model favoured certain gatekeepers. Today, artists can produce and release their own music.” Now, the “old model” has proved more resilient than expected.

Spotify’s share price has increased by 29% so far this year

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Source: Yahoo Finance

There’s no doubt that letting artists upload music directly was a fascinating and promising premise – and there’s no doubt that the end of the program represents, in some measure, a failure for Spotify. But analysts suspect this difficult decision (closing the program) was the right move. Mark Mulligan from Midia Research said: “Spotify did something really bold but hasn’t got any positives from it. They antagonised [the labels], it hasn’t gotten loads of successful artists through. And perhaps most importantly, it hasn’t moved the needle on the stock price.”

Investors had shown initial excitement at the plan to cut out record-labels, and saw Spotify’s embrace of indie artists as a kind of “Netflix moment” where the company could become less dependent on middlemen for content and start making more profit from the songs on its platform. That didn’t come to pass, but Spotify has found an alternative “Netflix moment” in podcasting.

Mulligan said: “It’s not a coincidence they are pursuing podcasts so aggressively. They needed another narrative to dangle in front of investors. The calculated risk Spotify is taking is: investors will feel there is enough upside in podcasts to make up for this [failed bet]. The next couple of weeks in terms of the stock price will tell us if that is enough.”

Disclosure
Dominion holds Spotify in its Global Trends Luxury Fund.


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