Spotify has signed a multi-year licensing deal with UMG, but respected industry analyst Mark Mulligan sees the agreement as the tip of a much larger iceberg that puts the music streaming leader in the fast-lane in its platform genre.
During the last two years, Spotify and Universal Music Group's negotiations for a long-term licensing agreement gradually turned into media-business brinkmanship, Billboard scribbler Rob Levine writes yesterday.
UMG chairman/CEO Lucian Grainge knew that Spotify was under pressure to go public, which would be hard to do without label deals -- and that Spotify co-founder/CEO Daniel Ek needed to reduce royalty payments to show investors the potential for profit. And as streaming became the dominant means of music consumption, UMG, like other labels, needed the service to convert more users of its controversial free tier into the subscribers that are fueling the recovery of the recorded-music business.
"It was like the U.S. and the Soviet Union during the Cold War," Peter Paterno, a partner at King Holmes Paterno & Soriano, tells Billboard. "Mutually assured destruction."
But now Universal Music and Spotify have finally agreed on terms for the streaming service’s new licensing deal which reportedly includes better rates tied to growth targets and premium windowing.
Although the big focus across the industry so far is, understandably, on what this means for Spotify, it is also part of a bigger story, namely that of the maturation of the streaming market and its associated business models.
Full text of the licensing agreement here
UG’s deal with Spotify: How Grainge and Ek (finally) got it done – Rob Levine, Billboard
Universal, Spotify deal is even bigger than it looks – Mark Mulligan of MIDiA & the Music Industry Blog
Why Spotify’s IPO-less IPO is a smart idea – Edmund Lee, Recode
Caving to labels: Spotify ends its music free-for-all – Fast Company