VKontakte and Universal Music Near Licensing Deal

Chris Ratcliffe/Bloomberg via Getty Images
The VKontakte app shown on an Apple Inc. iPhone 5. 

The deal follows a copyright suit against the platform brought by the three major labels.

Russia's Mail.ru Group, the owner of the social network VKontakte, is reportedly close to a goodwill agreement and licensing deal with Universal Music Group (UMG), which will complete VKontakte’s switch to offering users only legitimate music on the platform.

The leading Russian business daily Vedomosti quoted two people close to the negotiations as saying that a deal between VKontakte and UMG could be signed within days, covering, in addition to VKontakte, Mail.ru Group's two other social networks, Odnoklassniki and Moi mir.

According to the Vedomosti report, a three-year contract would stipulate an $8 million minimum guarantee and revenue sharing.

Universal Music Group declined a request from Billboard for comment on the deal. UMG remains the only global major with which VKontakte doesn't have a licensing deal.

Back in 2014, UMG, Sony Music and Warner Music filed a lawsuit against VKontake over copyright infringement. A year later, Sony and VKontakte signed a goodwill agreement, and Sony bailed. In October 2015, a Russian court ruled that VKontakte should take additional steps to prevent illegal uploads of music by its users, but awarded no damages to the plaintiffs.

Shortly after the ruling was announced, VKontakte and Warner signed a licensing deal. The social network was also reportedly in negotiations with UMG, but two months ago, the latter filed an appeal on the court's ruling.

A deal with UMG will allow VKontakte to fully switch to licensed music, replacing user-uploaded tracks and shedding the social network's reputation as the main source of illegitimate digital music content in Russia.

VKontakte's deal with Warner is reportedly worth $2.5 million a year, and its Sony Music deal is estimated to be worth $2 million a year. On top of that, VKontakte has deals with music distributor Orchard and local rights holders First Music Publisher, Soyuz and Nikitin.


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