Spotify signs deal with world's biggest record label

"It was like the USA and Soviet Union during the Cold War", Peter Paterno, a partner at King Holmes Paterno & Soriano, tells Billboard. Instead, the two companies seem to have struck a deal that gives each side what it needs, even if neither one managed to dictate all of the terms.

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 - setting Spotify subscriber growth targets in exchange for margin relief.

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. Normally, direct listings are used by small companies that don't expect much trading in their shares, or anticipate a big jump in their value. It's not close to a deal with SME or WMG, according to label sources, and the sticking point is - what else? - money.

Last year Bloomberg reported Spotify meant to go public in the second half of 2017. This would benefit Spotify's path to profitability and an IPO. The deal will nudge its free users to pay up. "This may be the beginning of something that's going to be an industry standard", says Russ Crupnick, managing partner of the consultancy MusicWatch.

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The multi-year licence agreement with Universal Music could make Spotify more attractive to Universal Music's artists, who include Taylor Swift, Adele, Lady Gaga, Coldplay and Kanye West.

Recently major labels have been pushing for paid subscriptions.

Artist managers argue that they need to know more detail about the deals done between the labels and the streaming services, so that they can properly audit the streaming royalties their artists receive.

  • Desiree Holland