Spotify and the Universal Music Group have struck a new multi-year licensing deal, with the music streaming service for the first time agreeing to window Universal’s music, giving paying users first dibs on new album releases.
“Starting today, Universal artists can choose to release new albums on premium only for two weeks, offering subscribers an earlier chance to explore the complete creative work, while the singles are available across Spotify for all our listeners to enjoy,” explained Spotify CEO Daniel Ek.
The deal paves the way for similar agreements with the other two majors. 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.
Negotiations between the labels and the streaming service were stuck because of Spotify’s large number of free users. The labels want music services to deemphasize ad-supported listening, and instead move as many users as possible to paid tiers. However, Spotify executives have long argued that free listening is a key part of the funnel used to acquire paying customers.
Their case has been bolstered by Spotify’s subscriber growth: Earlier this year, the music streamer announced that it now has more than 50 million paying subscribers. “The long-term success of Spotify, and others like it, is essential to the ecosystem’s enduring health,” acknowledged Universal Music Chairman and CEO Lucian Grainge Monday.
Spotify on its part had long resisted demands to make some releases exclusive to paying subscribers. The deal now struck with Universal represents a bit of a compromise. Spotify will still be able to stream the most popular singles to all of its subscribers, while introducing a relatively short release window for albums.
Adding more certainty about licensing fees going forward will also make Spotify more appealing to potential investors. The streaming service is expected to file for a public offering later this or early next year.