Spotify and Warner Music Group Come To Terms on New Licensing Deal

Armed with agreements from all three major record companies, will the streaming service finally go public?

Spotify renewed its licensing deal with Warner Music Group, giving the streaming service agreements with all three major record companies that pave the way for it to go public.

Negotiating for months after Universal Music Group renewed its Spotify contract in April, and for more than a month after Sony Music Entertainment signed its own deal in July, industry sources say Warner likely won some concessions to degrees that its competitors didn’t, though the broad terms - including the ability to put music on Spotify’s paid service for two weeks before its free tier - are likely similar.

WMG declined to comment on the deal terms, but announced the renewed partnership on social media.

“It's taken us a while to get here, but it’s been worth it, as we've arrived at a balanced set of future-focused deal terms,” Ole Obermann, WMG’s chief digital officer, said in a statement. “Together with Spotify, we've found inventive ways to reinforce the value of music, create additional benefits for artists, and excite their fans all over the world. Even with the current pace of growth, there’s still so much potential for music subscription to reach new audiences and territories."

Spotify also declined to comment on the details but said in a statement that its “partnership with Warner Music Group will help grow the new music economy where millions of artists can instantly connect with fans, and millions of fans can instantly connect with artists."

WMG’s deal is likely similar to UMG’s insofar as it allows Spotify to pay a smaller share of its revenue to the label as the service amasses subscribers.

But one area in which WMG may have come out ahead of its peers is the extent to which Spotify agreed not to squeeze WMG’s music with other content including its own - a factor in each major label’s contract, sources tell Billboard. So-called “fake artists,” or pseudonymous artists and producers whose tracks populate mood-based playlists, have been a growing concern for labels, who are competing for the same playlist space, and became a heated topic of discussion earlier this summer as WMG’s negotiations with Spotify were underway.

With all three majors on board, Spotify is now better positioned to offer its shares to the public, a plan it is seeking to execute via a direct listing rather than a traditional IPO.