Could Spotify and the record industry being headed for a standoff?

Over the course of the year, Spotify has discreetly started an interesting experiment: it’s struck direct licensing deals with some independent artists, bypassing the record companies. These license agreements with artists who do not operate through a record company are not exclusive and also allow them to distribute their music through other platforms such as Amazon or Apple Music, to receive a much larger amount of rights generated by the reproductions, and in addition to maintain all property rights over their music.

These agreements are specified as advances on reproduction rights that could be between tens and hundreds of thousands of dollars and the signs are that they are beginning to make record companies get nervous. Spotify is not trying to set itself up as a record company, given that it would have no rights over the music it streams, but it could be a key player in getting a certain number of artists to reach their audience directly through its platform. Estimates suggest the three major recording conglomerates, Sony, Universal and Warner, control around 80% of the business.

In a standard agreement, Spotify pays the record companies 52% of the billing generated by each song, and the record company pays the artist a percentage that usually ranges between 15% and, in some exceptional cases, up to 50% of that amount . According to a recent and exhaustive report by Citibank, the average outcome is that only 12% of revenue generated by streaming music goes to…