Music streaming market leader Spotify used to offer artists a direct route to listeners. Earlier this year, it closed that down, in a move that many interpreted as failure (or, more charitably, strategic withdrawal). Spotify had used this program to cut music labels out of the equation whenever possible: if you’re only sharing revenue with the artist – not the company that produces and distributes their music – you can carve out a bigger slice of the pie. Now, it looks like Spotify was not planning a strategic withdrawal at all, but rather marshalling its forces for a stronger strike in that direction: the acquisition of SoundBetter.
Spotify’s share price has appreciated by 18% so far this year
Source: Yahoo Finance
SoundBetter is a “music production marketplace for artists, producers, and musicians to connect on specific projects; and for people who are looking to distribute music tracks to those who want to license them.” It has around 180,000 registered users, and claims to have paid out more than $19 million to musicians and producers to date.
Compared to Spotify, that’s nothing. The company currently has 232 million users, and is worth about $24 billion. The cost of the acquisition is undisclosed – but it’s likely that whatever the number is, it won’t trouble the buyer. And the cost of SoundBetter is probably nothing compared to its value to Spotify.
Spotify is positioning itself as an “audio-first” company – hence, it is spending heavily on a number of ways to ramp up monetisation, the most notable of which is its newly emergent podcast segment. Closing the gap between artists and the platform – and cutting out the middlemen to whom Spotify has already paid out more than $14.3 billion in licensing fees and royalties – is another step in that direction.
Disclosure
Dominion holds Spotify in its Global Trends Luxury Fund.
Author: Theo Leworthy
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