M.G. Siegler:

Spotify pays most of its revenue to the labels to license music rights. The labels then pay a small amount of that money to artists. In the age of record pressing, compact disc encoding, physical distribution, and the like, such a middle man was needed. Today, that middle man seems, well, antiquated. The labels, of course, will say they do far more than this, and maybe they do — for now. But come on, this middle man is so getting cut out of the equation at some point.¹

And Spotify, more so than any company before it — aside from maybe Apple (more on that in a bit) — is in a position to do just that. Of course, they can’t come out and say this — though it sure sounds like Jimmy Iovine did recently (again more in a bit) — because it would be declaring open war on their most important partners. But this is inevitable: Spotify will work with artists directly to produce and distribute their music, becoming, effectively, a label.

It’s hard to argue with the logic. It’s just a matter of time.