07 April, 2017
A new licensing agreement between streaming service Spotify and record company Universal Music Group will affect certain consumers of the service. (The actual pact is more complicated, involving different royalty rates for different countries and circumstances.) On the other hand, UMG artists will be able to limit their albums to the paid tier for two weeks after release - although singles will be available for free - a concession that Spotify had previously declined to offer. If the codependent nature of Spotify and Universal's agreement isn't enough, this chart from Statista should make it clearer: According to the RIAA, streaming brought in more than half of the United States music industry's revenue in 2016. 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.
"Spotify must be very confident that they can raise enough interest from investors without investment banks to do that for them", said Josef Schuster, founder of IPOX Schuster, a Chicago IPO investment firm.
Furthermore, "having a public stock would also give Spotify's investors and employees the opportunity to cash in their shares", it said.
Spotify may be getting impatient, and that's good news for investors.More news: Comcast goes into U.S. wireless business with unlimited data plans
In 2015, its most recently disclosed period, Spotify had US$2.2 billion in revenue, but lost US$194 million.
For Spotify's enormous base of free users, the good times may be coming to an end. It has yet to reach long-term accords with the two other major labels, Sony Music Entertainment and Warner Music Group Corp. "This may be the beginning of something that's going to be an industry standard", says Russ Crupnick, managing partner of the consultancy MusicWatch.
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". Whether Spotify or music labels can make sustainable profits off streaming is another question, but it's clearer than ever that this is the bed that's been made for them.