Since early 2024, Spotify has been ramming almost each subscriber right into a cut-rate ‘bundled’ bundle involving music and audiobooks — and boasting concerning the large royalty financial savings whereas preventing publishers tooth-and-nail. Now, there’s critical pushback coming from Common Music Group itself — and a brand-new, direct licensing cope with Common Music Publishing Group (UMPG) to cope with the bundling humorous enterprise.
Earlier this month, DMN Professional revealed that Spotify had efficiently migrated greater than 99 p.c of its subscribers into bundled packages within the all-important US market, a part of a dramatic shift that began in March 2024. Now, the pushback is increasing past the music publishing sector, forcing Spotify to probably rethink these royalty downgrades.
In line with recent deal phrases confirmed to Digital Music Information over the weekend, Spotify and Common Music Group (UMG) have finalized a multi-year settlement encompassing recorded music and music publishing with necessary direct-licensing elements.
It’s a first-of-its-kind deal on the publishing aspect and a sign of a probably colossal royalty correction forward.
Spotify re-ups with UMG each few years, however this time, it’s totally different — very, very totally different.
A major facet of the refreshed settlement is a direct licensing association between Spotify and Common Music Publishing Group (UMPG) in the USA and different areas. This direct deal is the primary of its type for the reason that Music Modernization Act of 2018, and indicators a probably profound shift within the dynamics between streaming platforms and music publishers — and their label group dad and mom.
As of this weekend, it’s unclear precisely how Spotify’s cope with UMPG adjustments the publishing payout construction, notably for bundled royalties. Nevertheless, no less than two sources famous that UMPG is getting considerably higher payouts than the statutory mechanical royalties being metered out to different publishers, notably concerning bundled plans. That includes a considerable rollback or modification of bundling-based reductions, although it’s unclear whether or not Spotify is taking out them solely.
Past the UMPG deal, Spotify is known to be retaining its funds for different music publishers the identical.
However that might change very quickly as mega-label teams like Warner Music Group, Sony Music Leisure, and even Merlin begin making calls for—probably with the specter of content material removals on the recording aspect. You may nearly really feel the rumblings coming forward, notably provided that UMG tends to set the tone for ‘downstream’ offers involving smaller main labels and IP house owners.
However why would a direct publishing deal be wanted if the Music Modernization Act outlined phrases for all music streaming platforms (DSPs) and music publishers?
One purpose is that the MMA pact is solely breaking down, with music publishers successfully despising Spotify for exploiting statutory loopholes to pay them much less. That features UMPG, one of many largest music publishers on the planet, which has grow to be more and more vocal about its mistreatment by Spotify. After a 12 months of fruitless pushback, maybe it was time for a sit-down with UMG’s bosses.
Main up up to now, main music publishers—represented by the NMPA and its battling CEO David Israelite—spent a superb chunk of 2024 pushing again in opposition to Spotify’s bundling shenanigans, which concerned considerably lowered royalty funds to publishers and songwriters. The Mechanical Licensing Collective (MLC) even sued Spotify over the bundling shifts, although Spotify has been litigating again.
At one level, David Israelite even began pushing for a direct licensing construction between music publishers and streaming platforms to enhance present statutory charges. Israelite actually has the pull on Capitol Hill, although it’s unclear the place these direct-licensing efforts stand now.
Both means, Spotify’s message to publishers has been extraordinarily unfriendly. Given the predefined statutory charges and agreements, publishers have little recourse exterior protracted authorized battles and protests that hardly ever make it exterior of trade circles.
Whole US-based Spotify subscribers, November 2024, damaged down by tier (Supply: DMN Professional).
All of which necessitated a change within the recreation plan for 2025, with a distinct type of blowback now coming from Common Music Group. However there are additionally different features to this deal.
Within the settlement announcement, Common Music Group mentioned its Spotify settlement helps its “Streaming 2.0” imaginative and prescient, which seeks to reshape the economics of music streaming and guarantee fairer compensation for artists and songwriters. That imaginative and prescient contains new product developments and choices, together with new subscription tiers, bundled content material choices, and enhanced audio and visible experiences.
And, after all, there’s the reset on bundles combining music and non-music content material.
Notably, the deal additionally continues UMG’s deal with ‘artist-centric ideas,’ which, in keeping with UMG, ensures that artists are rewarded based mostly on their contribution to listener engagement and that their royalties are shielded from fraudulent exercise.
That features beforehand established guidelines like a 1,000-stream-per-annum threshold for triggering funds and removing the ‘noise’ of background sounds and AI-generated recordings.
(As a humorous apart, one indie label supervisor known as this ‘Streaming 2X’ provided that UMG is utilizing its muscle to get a much bigger lower from Spotify. Certainly, UMG has been shifting the tables to drive extra revenues into their coffers and away from indie labels, producers of background tracks, and AI factories, amongst different camps.)
Sir Lucian Grainge, Chairman and CEO of Common Music Group, expressed his enthusiasm for the deal, stating that it aligns completely with UMG’s ‘Streaming 2.0’ imaginative and prescient. “Once we first offered our imaginative and prescient for the following stage within the evolution of music subscription a number of months in the past—Streaming 2.0—that is exactly the type of partnership growth we envisioned,” Grainge relayed.
“This settlement furthers and broadens the collaboration with Spotify for each our labels and music writer, advancing artist-centric ideas to drive higher monetization for artists and songwriters, in addition to enhancing product choices for customers.”
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