The deal addresses royalty bundling, advances artist-centric principles, and propels the industry towards “Streaming 2.0”.
What does the new deal involve?
Spotify and Universal Music Group (UMG) have recently announced a transformative deal aimed at redefining the streaming landscape. Both companies have committed to fostering sustainable growth for the music industry, benefiting both artists and songwriters. At the core of the agreement are:
- A new direct publishing deal between Spotify and Universal Music Publishing Group (UMPG) in the US and other countries, designed to resolve royalty bundling issues.
- A continued emphasis on innovations towards the next era of streaming- “Streaming 2.0“.
- Initiatives to enhance artist payouts and improve monetisation strategies.
Spotify’s Founder and CEO, Daniel Ek, emphasised the importance of this deal at helping Spotify to sustain growth within the music industry, and delivering increased benefits for artists and songwriters.
Solving the royalty bundling dilemma
One of the most significant aspects of the agreement is its potential to address royalty bundling issues. Historically, Spotify’s audiobook bundling has allowed the platform to pay lower mechanical royalty rates to publishers and songwriters. With more than 99% of US subscribers migrated into bundled packages, UMG was likely more than frustrated about reduced payouts.
The new deal is understood to include:
- Royalties paid directly to UMPG will change.
- Bundle-related royalty reductions will be altered and largely minimised.
- Some form of royalty payout difference still existing between a bundled user vs. a music-only user.
While the specifics are complex, this agreement signals a shift in Spotify’s royalty payouts for bundled content, potentially improving compensation for songwriters and publishers under UMPG.
Strengthening Streaming 2.0 initiatives
This partnership signals another step toward embracing Streaming 2.0, driving the artist-centric principles behind it. UMG’s Chairman and CEO, Sir Lucian Grainge, said that this partnership is exactly the type of development he envisioned for the evolution of music subscription. The deal aims to enhance artist-centric principles by:
- Introducing new premium subscription tiers.
- Bundling of music and non-music content.
- Richer audio and visual content catalog.
“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 advancing product offerings for consumers.”
Sir Lucian Grainge, Chairman and CEO, Universal Music Group.
This agreement pledges both companies’ commitment to rewarding artists based on the audience they attract while safeguarding royalties from fraudulent streams. Key measures already introduced by Spotify, and other streaming platforms, including a 1,000 monthly listeners threshold for payments and filtering out AI-generated and background noise music.
What does this mean for artists and songwriters?
For songwriters and publishers, the direct publishing deal is a win. It promises higher royalty payouts for bundled services. Although these changes currently apply only to UMG’s publishing group, UMG often sets the tone for deals which inspire shifts across the industry.
However, the broader impact on artists remains mixed for many Streaming 2.0 initiatives. Premium subscription tiers and richer catalogs could drive engagement and revenue, but some artist-centric principles risk marginalising emerging talent. For instance, prioritising artists with over 1,000 monthly listeners may disproportionately benefit established acts and only puts more money in the pockets of major labels.
A step toward the future
The new UMG-Spotify agreement marks a significant step in the evolution of the streaming landscape, laying the groundwork for the next era of music consumption. While Streaming 2.0 initiatives continue to develop, we can only watch closely to see how these changes accelerate towards a new future of music streaming.
‘ The preceding article may include information circulated by third parties ’
‘ Some details of this article were extracted from the following source routenote.com ’
