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News October 27, 2015

Spotify cracks down on ‘payola’, changes to ‘freemium’?

Spotify cracks down on ‘payola’, changes to ‘freemium’?

Spotify is cracking down on the growing ‘payola’ practice in major streaming services. This is where external curators of playlists are approached by companies to include certain songs and favourable mentions in exchange for up to $10,000 in cash, products, concert tickets and merchandise. This is generally done through the brands’ agencies.

It’s hard to regulate, and there are no global guidelines by the ad industry on what is “acceptable” business in the streaming world. Getting new music on a specific playlist – run by DJs, journalists and random punters – is usually seen as the start of creating a viral interest in it.

Now Spotify is set to crack down on what’s been dubbed ‘playola’ with an upcoming set of new terms and conditions. It will bar users from selling accounts and playlists as well as “accepting any compensation, financial or otherwise, to influence… the content included on an account or playlist”.

The problem is how to enforce this. Billboard suggested that those on the receiving end of freebies could be hired as “consultants”.

There are enough examples involving YouTube vloggers and product placement in videos that this week the UK Advertising Standards Authority introduced new guidelines for vloggers. It spelled it out, “When it comes to vloggers (or bloggers or anyone else creating editorial content) the assumption is that any mention of a brand is an independent decision of the vlogger as the ‘publisher’. That’s why, if there is a commercial relationship in place, it needs to be made clear.”

In the meantime, reports that Spotify’s ad-supported “freemium” tier could undergo changes – especially the introduction of a premium-only tier for selected artists and releases – were given credence by Universal Music Group CEO Lucian Grainge.

Spotify and Universal Music are apparently close to finalising a renewal of their licence, which expires in September, as do its deals with the other major labels. According to sources, Universal has been aggressively pushing for Spotify to make its users pay for more content.

Universal has also pushed for YouTube to adopt a ‘pay tier’ and for SoundCloud to strike licensing deals with it.

Grange said in Hit Magazine, that with the “enormous potential” for streaming’s growth, the new model was no longer a question of “free” and “subscriber” but a mixture of both.

He said, “As I’ve said before, while ad-supported on-demand music definitely has a place, whether that’s as part of discovery or trials of new products and offerings, freemium alone is inadequate to support our critical ecosystem of artists, labels and the platforms themselves.

“What that means is that we must seek the proper balance between ad-supported and paid subscription. It’s not one or the other,” Grange added.

“With the two approaches in proper relationship, we can continue the level of investment we make in artists who then, in turn, can be fairly compensated for their work. If we get that right, everyone wins. That’s what we’re working towards.”

In the wake of Apple Music storming the streaming sector, Spotify has drawn $526 million in fresh capital to continue its international expansion and entry into video streaming (the company is now valued at $8.53 billion), and introduced new features for its curated playlists, including DiscoverWeekly and Fresh Finds.

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