Spotify and Universal Music Group have announced a new multi-year licensing deal, and in the process sparked speculation about what it means for the streaming service’s controversial ‘bundle’ royalties approach in the US.
The announcement of the deal referred to “new and evolving offers, new paid subscription tiers, bundling of music and non-music content, and a richer audio and visual content catalog” but the key paragraph focused on the publishing aspects.
“The new publishing agreement also establishes a direct license between Spotify and Universal Music Publishing Group across Spotify’s current product portfolio in the U.S. and several other countries,” explained the two companies.
The direct deal is what is sparking debate, given Spotify’s decision last year to switch to ‘bundle’ royalties for its Premium tier after adding audiobooks. Under the current US rates system, bundles pay out lower mechanical royalties, but a direct deal can change that.
“Sounds like Spotify is raising the white flag,” is how one ‘top publishing executive’ interpreted the UMG announcement to Billboard. “Although the new deal does not completely ameliorate that payment reduction, it does improve it,” was Variety’s description of the change.
“The effect of the bundle-related discount over the past year will effectively be nullified going forward, and payouts to UMPG and its songwriters will rise,” was MBW’s analysis, meanwhile.
“Spotify maintains its bundle, but with this direct deal [with UMPG], it has evolved to account for broader rights, including a different economic treatment for music and non-music content,” said Spotify’s spokesperson. “Maintains its bundle” suggesting that the white flag isn’t being waved just yet.
However, US publishing body the NMPA, which led the protests against Spotify’s bundle royalties, quickly issued its own statement, with president and CEO David Israelite hailing the UMG deal as “a clear sign that Spotify felt the backlash to its bundling scheme”.
“While we do not have details of the agreement beyond what was in the press release, it appears that it increases royalty rates which is good news for the entire industry. A rising tide lifts all boats and this signals that Spotify is coming back to the table after its disastrous attempt to manipulate royalty rates,” added Israelite.
That’s the important point here. If UMG’s deal has secured better royalties for UMPG and its songwriters than the bundle rates, will the other majors follow suit? What does this mean for independent music publishers? That question will likely be best answered in the ‘Phonorecords V’ negotiations to set rates for 2028-2032.
