Spotify Strikes Licensing Deal With Sony Music — Pact Includes Windowing Option

Spotify Strikes Licensing Deal With Sony
Courtesy of Daniel Ek

Sony Music Entertainment has struck a new licensing agreement with Spotify, a source close to the situation has confirmed to Variety, which leaves Warner Music as the only company that has not reached a deal with the service. The Sony deal, which was first reported Tuesday morning by Billboard, is expected to be finalized in the coming weeks.

The agreement helps to clear the way for Spotify’s long-anticipated public offering, which is expected later this year or early next year.

While terms of the Sony deal were unclear, the source tells Variety that it is generally similar to the deals the service struck in April with Universal, the world’s largest music company, and Merlin, the global digital rights agency for independent labels — a major component of which is windowing, whereby artists can withhold their releases from its free, ad-supported service for up to two weeks.

Reps for Spotify and Sony declined Variety’s request for comment or confirmation.

The deal leaves Warner Music as the only major player that has not closed a deal with Spotify. A source says the company is holding out for the best possible deal. Spotify had been operating without long-term agreements with all three major labels for close to two years, instead renewing their existing contracts on a month-by-month basis.

Spotify passed 140 million worldwide users as both its revenue and operating loss grew significantly in 2016, according to the company’s annual financial statement released last month. Spotify showed an operating loss of some 349 million Euros ($389 million) compared with a 236 million Euro loss the previous year.  Its gross profit was just $502 million. “This is explained by substantial investments that have been made during the year, mostly in product development, international expansion and a general increase in personnel,” directors Daniel Ek and Par Jorgen Parson wrote in the filing.

The company also said it will pay record labels at least $2 billion in royalties over the next two years.

The Sony news comes during a challenging week for the company, which has seen it dogged by accusations that it is playing a role in the creation and promotion of “fake artists,” who are paid a flat fee and no royalties, which some claim saves the company millions of dollars. Spotify has denied any participation in this practice.

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