Spotify, the music streaming service, on Wednesday, said that it has taken a part of the stake in DistroKid, which is a distribution service which helps recording artists in uploading their music across online stores and streaming platforms and this platform includes Spotify’s biggest rival, Apple Music.
Spotify revealed about its decision of taking a part of the stake of DistroKid in a blog post but did not give any exact percentage or dollar amount and said that it was only “a passive minority investment.” Spotify didn’t reveal the financial details of the deal when asked by Reuters.
This deal from Spotify plays a significant role since DistroKid, (in addition to other distributors such as TuneCore or CDBaby), is one of the prominent platforms in which independent artists who are not affiliated with a major record label could get music onto streaming platforms such as Apple’s Apple Music and Spotify.
Apple Music and Spotify (unlike YouTube and SoundCloud) don’t allow independent artists to upload their music directly to the service. They require that these artists work with them through a distributor.
This trend saw a change because, last month, Spotify allowed some independent artists to upload their music directly to its service. Spotify announced this partnership on Wednesday, which allowed artists who upload songs to Spotify to be able to distribute their songs to “other platforms” with the help of DistroKid. Spotify didn’t specify whether or not Apple Music would be included.
DistroKid is a platform that allows independent recording artists to upload their music across online stores. This way, writers get onto streaming platforms and showcase their talent to the world.
This investment has helped Spotify test out services that were once offered only by traditional record labels through distribution. If Spotify could charge artists money for such services, this can give a significant amount of revenue to the stream, which is beyond streaming music subscriptions.
Spotify lost $647 million during the first six months of 2018, due to the costs incurred by licensing payouts to record labels and artists for music.
Jeff Ponchick, the CEO of Repost Network, which focuses on distributing artists with followings on SoundCloud onto other music streaming services said- “They have a severe amount of pressure to get better margins. These (back-end services to artists) could turn into subscription services and could be the new revenue sources for these platforms.“
Spotify’ stock closed down 3.3 percent at $159.28 on Wednesday.