[…]Over the past year, Merlin has also struck several major deals that run counter to what major labels have been willing to do. It recently agreed to work with SoundCloud, the massive streaming site that has been described as the YouTube of audio while also drawing criticism for widespread copyright infringement. Before that, it signed a deal with Pandora, which previously hadn’t reached deals directly with labels, opting to use so-called compulsory licenses where the rates are set by the government. In its deal with Pandora, Merlin agreed to per-stream rates that can be lower than it would have gotten otherwise, in exchange for a commitment from Pandora to play songs from its labels more often.

This raised some eyebrows for its uncomfortable parallels to radio stations demanding cash payments for spins. Because Merlin’s members would be getting played more, artists left outside the deal would be getting played less often, echoing the sort of sweetheart deals that the independent sector has accused the major labels of cutting. “You can kind of look at that as very, very enterprising, or potentially troubling,” says Casey Rae, the CEO of the Future of Music Coalition, an advocacy group for musicians.

Still, the main issue is whether Merlin can be effective enough in negotiations, not that it runs the risk of being too effective, according to Rae. “Merlin has done some pretty amazing things in ensuring that the independent labels aren’t treated as second-class citizens,” he says. “Unfortunately, the fact is that the majors are able to put their considerable-sized thumb on the scale right out of the gates.”