Spotify Just Signed Its Last Major Label Licensing Deal

Spotify

Big, big news: Spotify has just signed an updated licensing deal with Warner Music Group.  That puts the last major label license in the bag — and brings an IPO ever closer to reality.

After months and months of arduous negotiations, Warner Music Group has renewed its licensing agreement with Spotify.  The deal, announced Thursday afternoon, finalizes an exhausting series of renewals.

That’s immensely important for Spotify and its Wall Street ambitions.  Warner represents the third (and final) major label to ink an updated Spotify deal, and finalizes a tense period for investors.  At present, we’re not sure of the term of this renewed contract.

Earlier, both Universal Music Group and Sony Music Entertainment concluded their updated licensing pacts.  But not without securing some critical concessions, including ‘gated access’ agreements.  Universal Music first demanded the concession, which would limit access to coveted releases to paying-only subscribers.

In that model, free users will have to wait.  All of which puts YouTube in an extremely advantageous position, and explains why Spotify staunchly resisted the measure.  But hey: no gating, no IPO.  And that explains that.

In typical fashion, UMG’s negotiation offered a template for subsequent Sony and Warner pacts.

And let’s not forget Merlin, the powerful consortium of independent labels.  Spotify has already finalized its discussions with the indie collective.

Accordingly, it looks like a Wall Street IPO could happen in early 2018, with investors like Goldman Sachs getting ready.  But thanks to an unusual plan to ‘direct list,’ the Securities & Exchange Commission (SEC) is rumored to be taking another look.

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And if you thought major labels were bad, have fun negotiating with the United States Government.

 

6 Responses

  1. Avatar
    Nick White

    Mr. Paul Resnikoff, I have some questions for you. How come there are ONLY two other websites besides yours claiming that “free” streaming will end in a few years? How did you come across such a theory? I know that some in the music industry have been pondering such an option considering that you gave an example of that. But, do the labels REALLY have a plan to do that? Seems premature given that Warner just re-licensed with Spotify? If so, who and where are your sources? Please give them. Have a good day!

  2. Paul Resnikoff
    Paul Resnikoff

    Sure, let me give you all my sources.

    One thing to keep in mind: these licenses are limited. I’m actually not sure how long this latest renewal is (someone chime in if they know), though earlier deals have been 1 yr. in length (a major problem for Spotify). Lower terms = greater flexibility (and less stability for Spotify).

  3. Avatar
    Will Buckley

    As equity owners, the major labels have a lot gain, monetarily, if Spotify can successfully float an IPO.

    At 20% ownership, with the present valuation of $13B, that translates to hundreds of millions for each label. Money that does not contractually have to filter down to the artists.

    • Avatar
      Anonymous

      I’m guessing Paul’s “sources” are the same ones that led him to smear artists who have nothing to do with far-right politics as Nazis. In other words, nonexistent “facts” that he made up and refuses to take responsibility for. Reminds me of our President!

  4. Avatar
    Gordon Gekko

    It’s sad that their will be people dumb enough to buy this stock. I guess the memories of Snap’s and Blue Apron’s stock performance aren’t fresh enough.