American Culture

Spotify’s “sponsored content”: payola by any other name…

by Amber Healy

SpotifyIt’s too soon to know whether the new “sponsored content” policy helps artists or harms them.

Payola is the practice—the illegal practice—of a record label paying a broadcaster to play a song or artist at a higher rate than other artists.

There was a massive scandal decades ago in which radio stations were found to accept bribes to favor this artist or that one. It brought down some of the biggest names in the then-fledgling industry, including Alan Freed, the man credited with coining the phrase “rock ‘n’ roll,” and Dick Clark.

But times have changed. Things are different. And there’s no law governing the use of cold hard cash to encourage streaming platforms to promote artists for the right price. It also indicates a change in practice for Spotify, which called for a halt to payola-type practices back in 2015. At that time, the Swedish company announced it would “explicitly prohibit” users from taking cash to include songs on its curated playlists, the Financial Times reported.

Tech Crunch first noted this week that there was a new opt-out feature on Spotify, titled “Sponsored Content.”

Spotify confirmed to Tech Crunch that it is testing a “sponsored song” ad which will allow “labels to promote singles on the free tier.”

As Josh Constine writes, “Instead of appearing as obvious ad banners like Spotify’s existing ads, labels can pay to have Sponsored Songs appear on playlists you follow or potentially elsewhere on the service. These can be targeted to appear to users with matching listening tastes so they fit alongside their other music. And these Sponsored Songs will be instantly playable and savable instead of requiring an initial ad click first.”

This is how promoted songs will appear in playlists:


It was not immediately clear whether labels were paying Spotify per impression, listen or save, Constine reported.

The program is still in beta and being tested and, according to Variety, will only appear on Spotify’s free subscription tier.

Jem Aswad at Variety calls it a “canny move by the service, both a relatively transparent and legal form of payola…and also a subtle way of monetizing the level of trust many users feel toward both its popular product feature Discover Weekly and playlists like Rap Caviar. It’s also another bonus the service can get out of its free service, which has enraged labels and music publishers who say it is hampering efforts to steer users toward paid subscriptions.”

Of course, it’s also a brilliant idea for Spotify, which has been losing money by the bucket pretty much since it was created. Users are up to around 140 million but revenue and operating loss increased in 2016, taking in just $502 million in profit while facing operating losses of $389 million.

The Future of Music Coalition is again sounding the alarm on payola, pointing back to a column it first published in 2015.

Payola on broadcast radio matters because “it distorts the entire marketplace for music and gives an unfair advantage to just a few giant companies at the expense of everyone else, including music fans,” FMC wrote at the time. “Most listeners assume that the songs they hear on FM radio are chosen for artistic merit or simply because the DJ has awesome taste… (I)ndependent artists and labels have few, if any, opportunities to be heard in their own local communities.”

In a tweet this week, FMC said, “Streaming advocates promised us all a democratized marketplace. This is kind of the opposite of that.”

There is still a version of payola practiced in traditional radio, involving songs that are played outside the normal broadcast format but featured as commercials or otherwise promoted with language establishing that the song is being played because it was sponsored by a label.

There’s nothing stopping Spotify or any other streaming platform from taking money from labels to play their preferred artists – the U.S. Federal Communications Commission regulates and stipulates practices on traditional radio but no such regulations exist online.

Whether this helps artists or harms them, whether it helps artists earn more than the fraction of a cent per stream, whether this is an experiment doomed to fail, we’ll have to stay tuned to find out.

Amber Healy, who has written for news outlets as well as NASA and the federal government, says she writes about music policy and lawsuits because they’re endlessly fascinating. This post first appeared at A Journal of Musical Things.