While streaming services like Youtube engage in ongoing negotiations with major record labels, Spotify carries the heaviest weight on its shoulders. As the most widely used exclusively music streaming application in the world, creators and listeners alike depend on its good standing with labels and proper payment methods for their artists. The company plans to unveil an IPO this year, despite its quarterly decline of millions of dollars, leading to many to question its future viability in the market.
In Spotify’s most recent offer to record labels, the royalty fee amount to just 52% of sales, down about 14% from its previous offer of 58% share. The royalty fees are what allow creators to receive payment for their uploaded material, and with a decreased amount set aside for those making the music, it will be challenging for those on the smaller side to make enough to consider maintaining loyalty to the streaming service.
According to the Financial Times, “Spotify made its latest offer before Christmas: it proposed cutting its royalty fees to about 52 per cent of sales from its current 58 per cent share — which at least one of the major record labels is warming to, according to people briefed on the negotiations.”
In exchange for this lower rate, record labels are reported to be asking for concessions in the form of stock, larger upfront payments and increased restrictions for their music on the site’s free and ad-supported membership tiers.