Spotify Scores New Licensing Deal With Sony
Spotify has reached a licensing agreement with its second major label this year, Sony Music Entertainment, after months of negotiations. Billboard reports that the new deal follows the music streaming giant’s multi-year licensing agreement with Universal Music Group announced back in April. The agreement terms allowed for Universal’s artists to limit new album releases to paid subscribers only for two weeks, marking a change from Spotify’s history of refusing to separate content between free and paid tiers. It also reduces the revenue the company must pay to UMG in royalties from 55 percent to around 52 percent, according to Billboard.
The terms of the new deal with Sony are not public yet, but specifics are reportedly similar to the agreement with Universal. Spotify signed a similar deal with major indie label network Merlin soon after the Universal deal. Merlin represents over 20,000 labels, collectively making up about 12 percent of the global digital music market. It is reportedly in talks with Warner Music Group, the only major label Spotify has yet to reach a deal with.
After raising $1 billion in convertible debt financing last year, Spotify is facing pressures to offer its shares to the public. The breaks in fees due to these new deals will be highly beneficial for the streaming service’s growth. According to Billboard, the company is considering a “direct listing” rather than a traditional IPO in a move that would reduce interest payments but also limit desirability for investments. These licensing agreements with major labels are clearing the road for the company to be listed on the New York Stock Exchange.
Spotify is the largest music streaming service, facing competition from similar services such as Apple Music and TIDAL. It boasts over 50 million paid subscribers and 140 million total users, far exceeding the 27 million subscribers of Apple Music. Despite $3.1 billion in revenue last year, Spotify’s net loss doubled to roughly $561 million.