Here's How Spotify Gets Labels To Pay for Play

Spotify has introduced a new option for music labels that allows them to pay to “drive incremental streams” for their artists.  It's the centerpiece of an advertising initiative called Marquee.

Labels can now purchase a pop-up ad prompting users to listen to Taylor Swift’s Lover, for example, on release day. According to confidential documents obtained by Rolling Stone, every time a Spotify user clicks on one of those advertisements, the label forks over 55 cents. The labels hope some curious clickers will then hit play on the advertised music, helping artists bolster their stream counts.

In Spotify’s pitch deck, which was sent to a distribution company, the platform advises artists or labels to spend at least $5,000 on these campaigns. If an artist pays that amount at 55 cents a click, the campaign should bring in more than 9,000 potential listeners over a seven-day period.

The streaming service’s announcement immediately drew comparisons to pay-for-play at radio or, maybe more accurately, the retail variation, where record shops asked labels to pay for premium positioning. “Stores would say, ‘we want you to pay us for this space,'” explains George Howard, a professor of music business and management at Berklee College of Music.

“Spotify is saying, ‘we want you to pay us to display your records.’ All this does is continue what payola always has done — the major labels, which have the most money and the most frequent releases, get the most play, consolidating the amount of art that is put out there.”

Charleton Lamb, a Senior Product Marketing Manager for Spotify who helped develop Marquee, hits back against any notion that streams are now for sale. “We’re hopeful that our recommendations are useful, that we’re able to match [artists] with people who are going to be interested,” he says. “But you’re not paying for streams. Every listener has the choice to either engage or not.”

Spotify’s decision to expand its arsenal of paid advertising tools does not come as a surprise. The streaming service became a public company in 2018, bringing new pressure to become profitable (Spotify has been sporadically in the black since the last quarter of 2018) and find additional ways of generating revenue. Revenue from advertising has become a special focus: Last month, Spotify CFO Barry McCarthy announced the company’s intention to increase it from 10% of overall sales to 20%.

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