UPDATED: Universal Music Group, the world’s largest music company, and Spotify, the world’s largest paid streaming service, announced on Sunday new, multi-year agreements for recorded music and music publishing “focused on growth, innovation and the advancement of artists’ and songwriters’ success,” according to the joint announcement. It also marks the first direct license between Spotify and a major publisher in several years.
While terms of the deal were not announced, sources confirm to Variety that the deal improves at least some of the payment structure of Spotify’s controversial music-audiobooks “bundling” deal, announced last year, which meant a lower mechanical royalty for songwriters and was so roundly condemned by rights-holders that the National Music Publishers Association filed a legal complaint against the streaming giant in June.
Sources tell Variety that although the new deal does not completely ameliorate that payment reduction, it does improve it; considering that Universal Music Publishing CEO Jody Gerson was one of the loudest voices criticizing the bundle, the terms must represent at least some significant improvements.
Popular on Variety
A Spotify rep said in a separate statement, “Spotify maintains its bundle, but with this direct deal [with UMPG], it has evolved to account for broader rights, including a different economic treatment for music and non-music content.” The unusual Sunday-afternoon timing of the announcement was due to the news leaking to Music Business Worldwide, which was first to report the deal.
National Music Publishers Assn. president/CEO David Israelite said of the deal: “The announcement of a deal between Spotify and UMPG bodes well for the industry and is a clear sign that Spotify felt the backlash to its bundling scheme. While we do not have details of the agreement beyond what was in the press release, it appears that it increases royalty rates, which is good news for the entire industry. A rising tide lifts all boats and this signals that Spotify is coming back to the table after its disastrous attempt to manipulate royalty rates… Songwriters should not be treated as the enemy, but should instead be treated as valued business partners.”
While much of the wording in the announcement is in bland generalities, it does note that “Artists, songwriters and consumers will benefit from new and evolving offers, new paid subscription tiers, bundling of music and non-music content, and a richer audio and visual content catalog,” adding that “the collaboration between these two companies will position the industry for continued subscriber growth and retention.” It concludes by noting that “The new agreements also renew the companies’ commitment to artist-centric principles, ensuring that artists continue to be properly rewarded for the share of audience engagement that they drive and that their streaming royalties remain protected through the platform’s application of its fraud detection and enforcement systems.”
While there’s little question that streaming, and Spotify in particular, returned the music industry to financial health after a 15-year tailspin due to illegal downloading, its payments to musicians and especially songwriters are a mere fraction of what they earn from the sale of physical product like vinyl and CDs. Streaming services roughly pay between $.003 and $.005 per stream, which is paid directly to the rights-holders (usually labels and publishers) who then pay the artist or songwriter and other stakeholders.
Not surprisingly, those meager payments mean that only the very top-streamed artists — usually superstars — are able to make significant income from streaming, which is why musicians have come to rely on touring, merchandise sales and brand partnerships for their livelihood.
However, even that model has faltered in recent years, as the post-pandemic glow has faded from the live-music industry and, in a tougher economy, many tours, even by major stars, have met with lower ticket sales than hoped — a truly existential crisis, as it leaves many musicians with basically no way to make a living while executives at music companies and especially streaming services are the primary beneficiaries — Forbes estimates Spotify CEO and cofounder Daniel Ek’s net worth at $7.4 billion.
Last week, singer-songwriter Bjork said “Spotify is probably the worst thing that has happened to musicians,” although on closer inspection her comment is more accurately aimed at the streaming economy in general.
Of the new deal, Lucian Grainge, Chairman & CEO, Universal Music Group said, “When we first presented our vision for the next stage in the evolution of music subscription several months ago — Streaming 2.0 — this is precisely the kind of partnership development we envisioned. This agreement furthers and broadens the collaboration with Spotify for both our labels and music publisher, advancing artist-centric principles to drive greater monetization for artists and songwriters, as well as enhancing product offerings for consumers.”
Daniel Ek, Spotify’s Founder and CEO, said, “For nearly two decades, Spotify has made good on its commitment to return the music industry to growth, ensuring that we deliver record payouts to the benefit of artists and songwriters each new year. This partnership ensures we can continue to deliver on this promise by embracing the certainty that constant innovation is key to making paid music subscriptions even more attractive to a broader audience of fans around the world.”
A rep for NMPA said the organization has no comment.
