Spotify projects paying $1bn to UMG over the next two years

Spotify projects paying $1bn to UMG over the next two years

The New York Post managed to snag another digital music scoop today by reporting on an internal Spotify email leaked to the publication stating that the streaming service expects to pay $1 billion to Universal Music over the next two years in royalties, ad revenues and subscription fees. 

The payments to Universal by the streaming service would represent up to 11% of UMG’s recorded music revenues between April 2015 and March 2016, and this will rise to 16% by March 2017.

According the the Post, Universal executives were surprised to see the $1 billion figure, stating that today’s payments are much lower. 

Spotify is currently in the midst of a heated debate with Universal around the renewal of its licensing deals, so it is unclear whether the leak will help or hinder its efforts.

According to recent statements made by UMG’s CEO Lucien Grainge, the label has changed its stance towards freemium services and wants to focus on their premium component. 

When it comes to Spotify specifically, it is likely that Universal would like the service to allow some new releases to be made available to premium subscribers only, in an effort to “window” the releases and encourage non-paying users to purchase the music or subscribe. 

Spotify, on the other hand, always contended that the only way to get users to convert from free to premium is to give them the full catalogue experience. 

 

(Andrea Leonelli)