Spotify is out of contract with all three major music companies, MBW has learned, with a dispute over revenue splits bringing disharmony to negotiations.
The Swedish streaming company has been out of a long-term deal with Universal Music Group for more than a year, say our sources.
Its contract with Warner Music Group expired in early 2016, while its licensing agreement with Sony Music Entertainment ran out of juice a few months ago.
In practical terms, this isn’t a huge problem.
Spotify continues to be licensed by all three majors on a rolling month-by-month basis, and the possibility of UMG, Sony or Warner catalogues being pulled is widely regarded as out of the question.
The majors, have, however, gnashed their teeth a little over Spotify’s recent promotional deals – not least its new family plan, which matches Apple Music’s equivalent by offering up to six people premium access for just $14.99 per month.
Some parties within Universal, Sony and Warner are believed to be uneasy about Spotify’s decision to announce such promotions without any long-term licensing agreements in place. (The situation was described by one senior major source to MBW today as a “very grey area”.)
Spotify’s investors, meanwhile, must be concerned about Daniel Ek’s chances of pulling off an IPO without long-term major label deals: the majors own around 75% of global recordings market share.
The bigger story here, however, is the reason behind the licensing impasse.
MBW understands that previous Spotify licensing deals with the majors, struck by the likes of Universal’s Rob Wells, were softer – revenue share-wise – than contracts agreed with rivals such as Rdio.
This was initially justified as a ‘marketing discount’ for Spotify, with Daniel Ek committing to spending a portion of the money saved on swiftly growing his company’s footprint.
So far, however, that agreement hasn’t budged.
MBW understands that the Swedish streamer continues to pay a revenue share of around 55% to labels (not including publishing money).
The now-bust Rdio, for comparison’s sake, paid around 60%.
Posted by Tim Ingham on Music Business, read the full article here.