Spotify, the world’s largest music streaming company, and Universal Music Group said Tuesday they have signed a new multi-year global licence agreement.
Under the deal, the terms of which were not disclosed, Spotify’s paying subscribers can have access to a new album by a Universal artist for a period of two weeks after its release, the two companies said in a joint statement.
But “singles are available on Spotify for all listeners,” its chairman and CEO Daniel Ek said in the statement.
Since it was founded in 2008, the online music listening service has never been able to generate a net profit, with the majority of its turnover going to the rights holders such as artists, producers and record majors.
For its part, the Universal Music Group (UMG), the world’s largest record label, will also get unprecedented access to data, “creating the foundation for new tools for artists and labels to expand, engage and build deeper connections with their fans.”
The musicians will know better about their listeners’ habits and profiles based on Spotify’s data.
Lucian Grainge, UMG’s chairman and CEO, underlined the need for the music industry to make Spotify profitable, as record music companies seek to limit its free services.
“Today, streaming represents the majority of the business. Our challenge is transforming that upturn into sustainable growth,” Grainge said.
“Spotify, with its position in its market, has the ability to make deals with the major record companies and large internet operators,” Jean-Emmanuel Verney, managing director at Paris-based Invest Securities, told AFP.
“If their business model becomes profitable, they will have even more power compared to their competitors. We have little data on Apple Music, Deezer or Napster, but we know that prospects for profitability are at Spotify,” he added.
Share for artists?
Another crucial point is the artists’ share of the cake, as some of them have complained over losing money because of music streaming.
In 2014, Taylor Swift, a UMG superstar, removed her albums from Spotify, saying it hurt her music sales.
“I think there should be an inherent value placed on art. I didn’t see that happening, perception-wise, when I put my music on Spotify,” Swift told Time magazine in 2014.
UMG, which controls labels like EMI, Capitol, Virgin, Polydor or Geffen, have signed record deals with such mega stars as Adele, Jay-Z, Lady Gaga, Massive Attack, Enrique Iglesias, Lana Del Rey and U2.
On this sensitive subject, Spotify’s agreement with Universal remains unclear.
“Under the agreement, the companies will advance their partnership to ensure that streaming realises its full transformational potential for artists, labels and fans,” the companies said in the statement.
Spotify, which is available in 60 markets, exceeded 50 million paying subscribers in early March.
The company is growing and consolidating its position as the world’s number one compared with competitors like Apple Music or Deezer.
It did not mention progress in negotiations with the two other majors companies, Sony and Warner.
“The fact that (Spotify) can become profitable will allow them to go very quickly on the stock market,” Verney said.
“There’s no reason why it should take time now.”