Is there the suggestion that he’s getting a sweetheart deal there? I missed it if so

No, this is just an evidence-free speculative conspiracy theory that is now my new head-canon

There are contracts that have been seen by major news outlets but they have not been confirmed/commented on by Spotify.

You can apparently trade off 3/4 of your royaltys for a higher placement on the coveted Spotify-owned playlists of different types of ambient music, childrens songs etc. According to the article. But stuff like that is not very transparent I guess..

How is Spotify “pocketing back the money”?

Just a guess but maybe not all deals between Spotify and artists are the same (% royalties paid)? If that was the case and Spotify music picking algorithms chose artists with lower % royalty, Spotify would save money.

My understanding is that that's not really how Spotify's financials work, in that how much will be paid as royalties _in general_ to everyone is calculated first as the "royalty pool" (something like 66% of revenue), and then how that money is split and to whom is calculated secondarily (using an algorithm called "streamshare").

So in this case, its affecting the "streamshare" calculation, but not the "royalty pool" one, and so not affecting how much money is in Spotify's pocket.

Smaller revenue share with these SEO artists.

To answer your question, they pocket it back by paying it to themselves. The artist is only formally an external ”artist”, but in this case he’s essentially one of their own. They curate him, let him on all the most promoted playlists and keep an appearance as if they’re paying it to some artist just like they do to anyone else. That artist gets all this firepower by agreeing to keep less of the cut while paying more of it back to Spotify in some other ways and it is all kept under the radar. That’s what I suppose.

Why wouldn't Spotify just do it themselves then? As they are doing: https://techcrunch.com/2023/12/14/spotify-confirms-test-of-p...