Updated: Jan 25, 2019
Back in September 2018, Spotify started offering artists the chance to directly distribute their material on the platform - without the requirement for a third-party aggregator or record label. I'm all for the opening of opportunities for independent talent and with every opportunity, there are some challenges.
So here’s the challenge. Spotify has to prove that they can take an independent music artist or band to the superlative levels of super stardom without any and all influence from outside parties. That is the essence of talent utilizing their platform over signing or partnering with another entity for exploitation.
Spotify must do this to justify the direct distribution offer they have presented to the landscape of music artists for talent to be able to sign directly on for Spotify distribution without a third-party or record label affiliation.
The offer is a 50/50 split on streaming revenue.
Now I know the lure of a direct relationship works in an indie artist favor when it comes to control and ownership, or dare I say partnership, with a major distributor but slow your roll a bit and watch out for the speed bumps.
Even if you do the math of what you get from the net revenue of let's say $10,000, you would get an obvious 50/50 split of $5,000. Simple, right?
Here's something else that happens, just so you're aware. If you were signed to a no-frills distribution deal (15/85), at about the current 52% (pro-rated, of course), of the $10,000 of net revenue, $5200 is sent to the distributor and they keep 15% of that ($780) and you get the rest, approximately, $4,420.
On a 50/50 label deal where you're signed to a label that's connected with Spotify, the label would receive the already agreed upon 52% of the net revenue ($5,200) and they would split it 50/50 with you, your take home is $2,600. Definitely less than the $5,000 in the direct deal.
There are other scenarios such as the antiquated 80/20 major record deal but we won't go into that one right now. (psst... it's way less than the figures above and that's if you don't have any recoupment, which would make that figure even less.)
Now that you have a feel for the numbers and are plotting your move, take one more thing into consideration. Jumping on an opportunity like this definitely benefits an artist but to receive a $5,000 payout from a streaming giant like this would take a considerable amount of streams and according to a March 2018 infographic from Information is Beautiful, (see photo) Spotify is ranked 6th out of the 9 major music streaming services for average artist revenue earned per stream, at $0.0044.
At this rate, to make $10,000 (we're talking before the splits and without any other cost, expenses, payouts for operation) an independent artist would need to get 2,272,278 individual streams on the Spotify platform. That's a ton of work for an independent artist, but it's not impossible. I believe in you.
My suggestion, if you do go for the direct 50/50 split with Spotify:
Make sure you have a plan to generate what you need to make a profit.
If you have a big enough buzz and your fan based is engaged, see if you can license your music to Spotify for a period of time as they could be more inclined to promote and market your works after paying you an advance or licensing fee for it. No one likes a bad investment, so they would probably do as much as they can to get in the black with what they paid you for it.
Don't just use one platform to distribute your music. Spotify has a 191 million active users, according to DMR - Business Statistics (Dec. 2018) but Apple, YouTube and even Soundcloud have a respectable count of streaming fans listening to music.
In the end, the choice is yours but look at or combine your best options.