Daily Management Review

FT: Major labels reject Spotify's idea of reducing royalties in exchange for promotion


Three major music labels - Universal Music, Sony and Warner - have turned down an offer from streaming service Spotify to participate in the Discovery Mode marketing programme, the Financial Times (FT) reports, citing sources close to the situation. The terms of the programme involve Spotify promoting selected tracks in an auto-play algorithm but paying less royalties.

Donald Trung Quoc Don
Donald Trung Quoc Don
Universal Music, which previously used other promotion methods from Spotify, announced a new licensing agreement with the streaming service in 2020. According to three FT sources, the company has opted out of the Discovery Mode programme.

Label executives told the FT on condition of confidentiality that they compared Spotify's actions to the practice of promoting songs in exchange for secret payments to TV and radio stations. The practice is outlawed in the US and many other countries, but Spotify, as an internet service, is not subject to airtime restrictions.

Another music service, Pandora, experimented with a similar idea in 2014. Pandora founder Tim Westergren told the FT that the company abandoned the idea because it promised listeners would pick the best music and the promotion of songs "contradicted everything we claimed". However, he said that in the context of streaming services "the only way to make money is to pay less for music".

source: ft.com