Spotify today took another step in its efforts to expand services for artists to help diversify away from a business model that is required to pay music streaming royalties to labels: it has acquired SoundBetter, an artist production market , producers and musicians to connect to specific projects; and for people who want to distribute music tracks to those who want to license them.
SoundBetter has about 180,000 registered users and has paid more than $ 19 million to musicians and producers to date, on average about $ 1 million per month at present, self-cutting through a commission (with an obvious percentage ) for any agreement secured through the Platform.
Financial terms for the deal are not disclosed, which means it is unlikely to be a significant amount for the $ 24 billion streaming giant, which now has 232 million users, including 1
SoundBetter does not suspend acquisition: a spokesperson confirmed to TechCrunch that it will work as usual as Spotify and the startup is working to integrate SoundBetter's services with Spotify for artists, which currently offer musicians and other analytics on Spotify tracks and other services to help market themselves.
SoundBetter was founded in 2012 by Shachar Gilad (CEO) and Itamar Yunger (CTO) and runs two main services. Its main business is an online marketplace for musicians such as source singers, sound engineers, producers and other music and audio professionals to put the finishing touches on track (think Fiverr or Behance, but especially for music). In June this year, it launched a newer marketplace called Tracks for People to Licensed Finished Music, competed with the likes of Epidemic Sound (which earlier this year raised $ 370 million worth of money) and Soundcloud.
Interestingly, Spotify had attempted to launch a direct music distribution platform earlier – including with an investment in DistroKid, a music distribution service that supports cross-platform consultations – but the effort never left the beta phase and ended since last July. That decision may be more meaningful now, since the move may have been made to pave the way for SoundBetter.
For Spotify, the deal is actually a signal that the company will continue to invest in more behind the scenes services for artists and others in the music ecosystem. There are a few reasons why this must happen.
First, there are financial problems for the musicians themselves. They have long complained about how little they earn on Spotify, so having additional services available to them either to make money or at least work more efficiently in their craft can only be a boost to that relationship.
Second, there are the basics of Spotify's streaming business for Spotify itself. The company says it has paid out more than € 13 billion ($ 14.3 billion) to rights holders since its launch – there is money paid out with each stream – and that it is a renegotiation of label agreements all the time, but the company still works with loss from its basic business model (although the loss seems to shrink).
Third, diversification would help to take some pressure from the flow side of the business overall. Even putting profitability aside, last quarter, Spotify faced some criticism (and a fall in the share price) for missing its own goals for subscription growth .
“As we develop our tools for creators, we want to give them the resources they need to thrive. SoundBetter has the same vision, ”said Beckwith Kloss, VP Product, Creator at Spotify, in a statement. "We are delighted that the creators can generate revenue through SoundBetter and benefit from their network of top professionals – from instrumentalists to songwriters to producers – when they make their tracks perfect."
Over the years, Spotify has amassed a growing list of assets that take the platform beyond basic music streaming, with much attention from late focused on spoken word content, providing cloud-based studio services through SoundTrap ( acquired by Spotify 2017 ) and the podcast platform Anchor ( acquired last year ).
But music continues to be the drum of the platform – with paid streaming continuing to grow at the expense of the physical music industry. So Spotify will continue to build that area within its business as well (not least also as competitors like Apple continue to build their own services for artists who go beyond traditional labels).
SoundBetter already has a decent, if relatively small, company with its fair share of big names. It claims that "Kanye West's producer, Hoobastank's drummer, Jamiroquai's guitarist, Beyoncé's songwriter, Joe Cocker's bass player, Herbie Hancock's engineer, Morrissey's guitarist, Killers' mix engineer and George Michael's mastering engineer" are among those using its services. Getting acquired will give it a big boost in exposure: Spotify for artists currently has 400,000 registered users, but with the platform itself a cornerstone of digital music distribution, Spotify hopes that with the right mix of services, including the type that SoundBetter has built, that number can grow much larger.
" SoundBetter offers the most comprehensive global market for professional music and audio production in the world together with a member community spanning 176 countries and 14,000 cities worldwide," said SoundBetter Co-founder and CEO Shachar Gilad. "We are delighted to benefit from Spotify's global scale, resources and vision to expand our network and drive more financial opportunities for artists of all levels."