Streaming giant Spotify (SPOT) and Universal Music Group or UMG (UMGNF), the world’s largest music label, have announced a new multi-year agreement. This deal strengthens the relationship between the two industry leaders and includes changes to Spotify’s business model, such as new pricing tiers, making its offerings more attractive to a broader audience.
According to the deal terms, a direct license will be established between Spotify and UMG’s publishing arm. This will help simplify the licensing process and potentially reduce costs.
Also, the partnership will introduce new paid subscription tiers and innovative bundling options that combine music with other audio content. Further, users will have access to an expanded audio and visual content catalog, which might help drive subscriber growth and retention.
Spotify’s New Deal Comes amid Increasing Scrutiny
The new agreement comes at a time of increasing scrutiny over Spotify’s business practices. Last year, the National Music Publishers’ Association filed a complaint with the U.S. Federal Trade Commission, raising concerns about Spotify’s expansion into audiobooks and its potential impact on royalty payments to songwriters.
Meanwhile, Spotify is actively working to enhance profitability. The company has implemented cost-cutting measures, including employee layoffs and reduced marketing expenses. Additionally, they have raised prices for premium subscriptions in the U.S. market.
Is SPOT a Good Stock to Buy?
Turning to Wall Street, Spotify stock has a Moderate Buy consensus rating based on 20 Buys and seven Holds assigned in the last three months. At $506.63, the average Spotify price target implies 0.74% downside potential. Shares of the company have gained 57.67% over the past six months.
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