What people are missing on Spotify’s payola debacle

The biggest news everyone woke up to on Tuesday was Spotify boosting artist music more in the algorithm in exchange for a lower royalty rate. This essentially means, an artist or label picks their priority record, and that specific record is amplified in exchange for a lower royalty rate for that record only.

The reaction? People are pissed.

You only needed to check the replies on Tommy Faith’s (Triple J Unearthed EP) tweet to get the general vibe. 

However I think when you look at it deeper it’s not such a bad thing. Dare I say it (incoming hate mail!), it might actually be a good thing.

Every label and artist manager I know already allocate a budget for each priority release to pay Spotify to promote their record via advertising in order to boost streaming or follower numbers. All Spotify is doing here is providing a contra alternative to what is already happening. 

However it’s better than the current status quo, as now Spotify will be incentivised rather than just getting paid up front regardless of how many people actually stream the song. 

If Spotify successfully gets thousands of streams for an artist, the label/artists will pay them via receiving less royalties, rather than the upfront cash payment for advertising that they were paying before. 

If Spotify pushes the song out and it gets very little plays, the label or artist won’t lose much money at all, and better still, they’ve saved on the up front marketing cost. 

Feels like a win/win to me, although I do acknowledge the risk of this going too far where artists may get hurt. 

For example, if too many artists opt in, then the artists who don’t might actually see their songs suppressed in algorithms rather than simply missing out on amplification. This could, in a worst case scenario lead to a slippery slope of, “If you want anyone to hear your music ever, Spotify needs to pay you nothing”.

I acknowledge that fear and that possibility. However, the optimist in me thinks this is only a good thing for both artists and Spotify and there are enough reasons why the worst case scenario won’t happen. 

This new contra alternative will ensure Spotify are incentivised to push artists, and artists won’t have to pay them up front for marketing, therefore helping their cashflow and de-risking marketing budgets. 

This article originally appeared on The Industry Observer, which is now part of The Music Network.