The way it currently works, you can make it onto Spotify or any other streaming service by being signed to a label or going through a distribution service such as DistroKid or CD Baby. Spotify is looking to change that. According to a report by Billboard, Spotify is attempting to go straight to the artist and their managers.
Billboard says Spotify has begun licensing songs directly from artists and paying them "several hundred thousand dollars" for their tracks and then paying both the artists and managers a lower royalty rate afterward.
The upside to that is that despite the lower royalty rate, it's just the artist and their manager keeping all the money and not any being lost to a label.
Recode offers the following caveats for this situation that helps clarify things a lot.
- Spotify is licensing music. They are not a label.
- These purchases don't mean artists are bound to Spotify only, and can still stream on other services.
- The service doesn't seem to be going after major stars right now, but mid-level acts as to not spark a war with labels.
It'll be interesting to see how this plays out for Spotify, especially since it seems like they're playing the long game.