After two years of tense negotiations, Daniel Ek can sleep a little easier.
Universal Music Group has officially signed a new, multi-year global licensing deal with Spotify – a vital step in the streaming company’s journey towards attempting an IPO.
UMG is believed to have agreed to lower the revenue share of Spotify payouts received by its recorded music operation, but has made sure it’s got some goodies in return.
As suggested by MBW last month, Universal is understood to have set Spotify subscriber growth targets in return for its reduced payment.
Should the streaming company fail to meet these agreed milestones, UMG’s reduction in Spotify revenue share would be postponed (or even potentially reversed).
In addition, and as widely expected, Spotify has acquiesced on something some said it would never do: placing certain music releases exclusively on its premium-only tier.
Daniel Ek, Chairman and CEO of Spotify, said, “This partnership is built on a mutual love of music, creating value for artists and delivering for fans. We will be working together to help break new artists and connect new and established artists with a broadening universe of fans in ways that will wow them both.
“Starting today, Universal artists can choose to release new albums on premium only for two weeks, offering subscribers an earlier chance to explore the complete creative work, while the singles are available across Spotify for all our listeners to enjoy.”
Daniel ek, Spotify
“We know that not every album by every artist should be released the same way, and we’ve worked hard with UMG to develop a new, flexible release policy. Starting today, Universal artists can choose to release new albums on premium only for two weeks, offering subscribers an earlier chance to explore the complete creative work, while the singles are available across Spotify for all our listeners to enjoy.”
Music to Taylor Swift’s ears.
Sir Lucian Grainge, Chairman and CEO of Universal Music Group, commented: “Eight years ago, when streaming was a welcome but small source of revenue, UMG embraced partners like Spotify as a way to help return music to a vibrant future benefitting the entire ecosystem.
“Working hand-in-hand with these digital services brought us the industry’s first real growth in nearly two decades. Today, streaming represents the majority of the business.
“Our challenge is transforming that upturn into sustainable growth. In a market this dynamic, one evolving more rapidly than ever before, success requires creative and continual re-evaluation of how best to bring artists’ music to fans. At UMG, we’ve not only reimagined distribution models and technologies, but entire business models.
“The only constants must be great music and fair compensation for artists and creators. To that end, the long-term success of Spotify, and others like it, is essential to the ecosystem’s enduring health.”
Sir Lucian Grainge
“The only constants must be great music and fair compensation for artists and creators. To that end, the long-term success of Spotify, and others like it, is essential to the ecosystem’s enduring health. I congratulate Daniel on Spotify’s continued growth and innovation, and I look forward to working together with him and his team to develop exciting new ways to connect artists and fans around the world.”
Added Ek: “I want to thank Sir Lucian for his leadership in everything we have done so far and in everything that we will do together to deliver on the promise of the new music economy for all the people who make music and all the people who love it.”
In 2016, Universal Music generated $1.6bn from streaming platforms – more than physical or download formats, and 43% of its total sales/streams revenue.
In a press release issued today, Spotify said that the new deal with Universal will ‘advance [our] partnership to ensure that streaming realizes its full transformational potential for artists, labels and fans by delivering a comprehensive range of music experiences, providing more flexibility for new releases, and collaborating on innovative marketing campaigns across Spotify’s platform’.
It added: ‘The new agreement will also provide UMG with unprecedented access to data, creating the foundation for new tools for artists and labels to expand, engage and build deeper connections with their fans.’Music Business Worldwide