Spotify’s SoundBetter acquisition may spark new revenue stream


Spotify announced its latest acquisition yesterday afternoon: it’s bought ‘music and audio production and collaboration marketplace’ SoundBetter. That’s a site that helps musicians find other musicians, producers and mixing/mastering engineers to work with: it’s signed up more than 180,000 artists since its launch in 2012.

For now SoundBetter will continue to run as usual, sitting within the Spotify for Artists division of the streaming service. “Over the coming months, we’ll be investing in making the experience even better,” promised Spotify.

Two takeaways from Music Ally. First, this ties in to a recent survey that Spotify ran with artists, asking them how they’d like it to expand its ‘provider directory’. Currently that only focuses on artist and label distribution services, but the survey asked if artists would appreciate directories of session musicians, vocalists, mixing and mastering engineers and other collaborators – exactly what SoundBetter offers. So, our suspicion is that at some point, SoundBetter will be integrated into (or, indeed, become) Spotify’s provider directory.

Second, though: SoundBetter may be a first glimpse at how Spotify will start to generate revenues from its artist tools. SoundBetter works by artists posting ‘jobs’ and then hiring collaborators, and the site encourages them to pay those people through its site – “pre-funding” the cost through SoundBetter, which releases the money to the collaborator when the artist is happy with their work, with the promise of support “if something goes wrong in working with a provider”.

Here’s the key point, from SoundBetter’s FAQ: “We charge our providers a small commission for jobs we facilitate. Providers are happy to pay this commission because they get job leads, project management tools, increased trust and security and verified reviews which add to their online reputation.” So, every job arranged through SoundBetter yields a small commission for the company – and now for Spotify.

More than 400,000 artists are currently using the existing Spotify for Artists tools, and the streaming service will now be promoting SoundBetter to them (and as we said, in time, likely integrating into the Spotify for Artists toolset more deeply). Those small commissions could add up, if SoundBetter’s community thrives under Spotify’s wing.

This is speculation: it’s also possible that Spotify will drop the commission and refocus SoundBetter as an unpaid middleman for music-recording projects. But either way, the deal is a reminder that Spotify’s ‘two-sided marketplace’ does have the potential, at some point, to be a meaningful revenue stream for the company. We tend to focus on the likelihood of Spotify starting to charge labels for marketing-related tools on its platform, but artists (or rather their ‘providers’ in this case) could also contribute to this future income for the company.

Stuart Dredge

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