Spotify: Take a lower royalty rate, we’ll get you more plays. To me, that’s bad news for artists.

From Musically’s live blog of Spotify’s Stream On event:

Hellman talks about ‘Discovery Mode’ – the feature where artists or labels can pay to have songs surfaced in Spotify’s radio and autoplay features, in exchange for a lower royalty rate. That caused some controversy when announced, so it’s interesting to hear Hellman’s claim today: labels taking part in the tests have “been able to find new listeners and grow audiences for artists on their roster: during pilot testing, on average Discovery Mode has helped these labels grow streams by 30%, resulting in higher royalty payments for artists opted into the test”.

“Hellman” is Charlie Hellman, part of Spotify’s artist tools team.

Discovery Mode sounds like a great deal, on the surface. Take a lower royalty rate, and you’ll get more plays. Even if you get more money in the short term, this seems like a bad thing for artists.

Here’s why: As artists take the lower royalty rate, especially if they get a lot of plays, the overall royalty rate will go down. This hurts artists as a whole. And saves Spotify money. Their total payout pool for artists goes down.

And what if an artist takes the chance, opts in to the lower royalty rate, and they end up not getting more plays. Will Spotify move them back to the higher default royalty rate in that case?

One more concern here is a lack of transparency to the listener. If you are listening to a Spotify stream, will you hear a disclaimer on a playlist for songs that take the lower royalty rate for the promotion of Discovery Mode?