UMG's Deal With Spotify: How Grainge and Ek (Finally) Got It Done

UMG's Deal With Spotify: How Grainge and Ek (Finally) Got It Done


As previously reported, Spotify confirmed on Tuesday that - after long drawn out negotiations - it had signed a new multi-year licensing deal with the world's biggest record company. Essentially what this means is that Universal artists will be able to choose to keep their albums behind the Spotify Premium paywall for two weeks before they are released across the entire platform. Instead, the music streaming service is considering a direct listing, in which the company would simply register its shares on a public exchange and let them trade freely, people familiar with the matter told WSJ. But he became more willing to compromise - sources have hinted that Spotify general counsel Horacio Gutierrez played a key role - and the deal couldn't wait much longer.

The "narrative" required to fire up investors isn't just that Spotify is reducing its royalties burden and inching toward profitability; it's one of confidence that it can survive and prosper in the long-term, against competition from the deepest-pocketed tech giants. A successful IPO would benefit the major labels, which have equity in the company, although executives now consider the revenue it -generates to be far more important.

Spotify, worth $8.5 billion as a private company, has been rumored to be seeking an IPO for some time.

Going public isn't without risk for Spotify. And as of now, the service has only reached this "windowing" deal with Universal Music Group and not Sony, Warner or EMI.

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For Spotify's enormous base of free users, the good times may be coming to an end.

The partnership promises to "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".

UMG's deal could do that - although removing albums from Spotify's free tier will also drive some listeners to Apple's iTunes, or piracy - since it allows the service to decrease its royalty payments only if it hits certain subscriber numbers. "If they're scaling, artists are making more money and labels are making more money".

  • Kyle Warner