Spotify's latest "50% back means 50% more" ploy to use its music service to allow Capital One to sell subscribers indebtedness is raising some eyebrows. In fact, Attorney Chris Castle says the deal would likely be illegal were it made with any artist one-on-one.
Guest post by Chris Castle of Music •Technology • Policy
Spotify is using its music service to help Capital One sell indebtedness. And by the look of the campaign, Spotify is helping Capital One try to make debt groovy for millennials. That would be the millennials who probably owe tens if not hundreds of thousands of dollars for the college diploma they admire when they get back to their micro apartment from a long day of baristaing.
Yet if Capital One tried to make the same deal with any single artist for this kind of premium tie-in, the artists could likely block it. Why? Most record deals give the artist a “marketing restriction” that looks something like this:
Label will not use Masters made under this agreement in premium Records to promote the sale of any product or service other than Records. The restriction set forth in this subparagraph shall apply during and after the Term.
This prohibition is usually absolute and is generally an easy give by the label in a new artist negotiation. That’s why you don’t see too many premiums out there in the market place.
But–Spotify breaks the loophole mold again. Not only do they associate music with a credit card (something that some artists will object to, particularly progressives who may not look too kindly on banks–see Consumer Financial Protection Bureau) but Spotify also takes the next step–using music as a loss leader to promote credit cards.
Capital One gets to have their music industry tie in by having all the music for a premium. And Spotify probably got a branding fee that they do not share will the artists in return.
On top of it all–Spotify diminishes the value of music by using the 50% discount–that’s right 50%–as a loss leader for both Spotify’s subscription service (aka the valuable part of the Spotify service) and for Capital One to sell more indebtedness to fans.
Even if Capital One is in fact paying full rate and just discounting to its card holders, which I seriously doubt, the campaign itself devalues and disrespects music by treating us as a commodity that can be bartered for a fee.
That’s why the marketing restriction on premiums in the first place. So Spotify is doing indirectly that which they probably never could do directly. So what’s in their wallet?