Universal Music signs new licensing deal with Spotify

Spotify and Universal Music have confirmed that they had finally inked a new multi-year licensing deal after long drawn out negotiations.

As much previously reported, Spotify needs new multi-year licensing deals with all the big music rights owners before it goes to Wall Street with its IPO. It also needs to ensure that its original business plan of keeping 30% of revenue is in tact, despite recent efforts by the music publishers to increase the share of digital income they receive. That chiefly means getting a better rate from the record companies.

Although the labels and publishers have no interest in the Spotify IPO tanking – what with the majors and Merlin-repped indies having equity in the business, and the recent growth in the recorded music market being mainly down to subscription streaming services of which Spotify is the biggest – at the same time, the rights owners know that their negotiating power will likely decrease post Spotify’s flotation.

As expected, Universal gets itself some windowing as part of the new deal, with the label now having the option to keep new releases off Spotify’s free service for the first two weeks of release. Such windowing – seen by many at the labels as an incentive for freebie streamers to upgrade to premium – has been long discussed in the music community, and has seemed inevitable for some time.

Of course, if the windowing really does persuade free users to go premium, Spotify wins too. Though the streaming service has been hesitant of stripping back its free offer to date, mainly because it fears freemium subscribers might switch to YouTube or piracy services, and Spotify relies on its free userbase as the key marketing channel via which to upsell premium.

Confirming windowing was a key concession made to Universal in the new deal, Ek warbled yesterday: “We know that not every album by every artist should be released the same way, and we’ve worked hard with Universal Music 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”.

In terms of the specific financials – the new revenue share arrangement and any accompanying advances and minimum guarantees – those are, of course, top secret. Because imagine if a Universal-signed artist actually knew how their music was being monetised by the world’s biggest streaming service! The sky would surely fall in and not even Grainge’s trusty sword could save us all.

“Working hand in hand with these digital services brought us the industry’s first real growth in nearly two decades”, boomed the Universal boss when confirming the new Spotify deal yesterday. “Our challenge now 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”.