Will Direct Distribution Result in the YouTubification of Spotify?

Spotify until now has been chiefly about, for want of a better word, the ‘professional musician’. True, many artists on the platform may not be making a living exclusively through their art, but many are still going through some form of label services and distribution deal. For all the talk of gatekeepers being upended by digital, in essence it has simply created a new generation.

The announcement yesterday (September 20^th) that Spotify will now be offering direct distribution deals could instantly shift this. Think back to the original mantra of YouTube ‘Broadcast Yourself’, when the site first launched back in 2005. While YouTube was originally the home of pirated content, users swiftly began uploading videos of their lives, thus giving rise to the YouTuber. Fast forward a decade and YouTubers have become part of the cultural lexicon, 20-something-year-old millionaire gaming vloggers rubbing shoulders with traditional media’s elected stars. Yet this was not entirely accidental. YouTube’s algorithm favoured this type of content by emphasising engagement over views, allowing content forms such as Vlogs and gaming walkthroughs to steal a march over music in young people’s media consumption habits.

This brings us to Spotify’s decision. Spotify effectively has the same motives as YouTube, to build their own content library and thus lower costs.  They arguably has an even greater imperative to do so than Alphabet-owned YouTube as monetising music is their core business, compared to YouTube’s ad-supported cushion from Google. Spotify have the data and machine learning capabilities to see what is already performing well on the platform. What is therefore to stop them from sorting through thousands of hours of content to find certain tracks suitable for their most popular playlists? Such a strategy could be employed under the radar, as tracks are seeded into curated playlists, while metrics, such as their addition to users’ individual libraries and own playlists, are measured. Before long, Spotify would have meaningful data around what works and what doesn’t, and has essentially undercut much of the A&R process. What this means for music itself is important. Spotify will want to push artists that serve its platform's interests, meaning it will likely favour artists who are already gaining traction on other monetisable areas such as social media. The hope, from Spotify’s perspective, is that these audiences can be navigated over from other platforms to Spotify, and thus increase engagement on longer form podcast content. In essence, the move could make Spotify a lot more like YouTube than other streaming services.

Of course, while distributors will likely not be happy, but there is no guarantee this will work. Business history is littered with examples of combining distribution and production, often with both sides underestimating how difficult the other is, let alone merging the two. Soundcloud’s USP as the breeding ground for talent and an A&R tool for labels will also be diminished, now that Spotify will enable artists to directly upload to their platform. What’s certain is Spotify has made a bold statement of intent with this play to move across the value chain and will be unlikely to retreat.