How Griange And EK [Finally] Got It Done

The New Licesing Deal Between UMG And Spotify Gained Both Parties Valuable Wins. Where Do They Go From Here?

- Robert Levine

DURING THE LAST TWO YEARS, Spotify and Universal Music Group’s negotiations for a long term licensing agreement gradually turned into media-business brinkmanship. UMG chairman/ CEO Lucian Grainge knew that Spotify was under pressure to go public, which would be hard to do without label deals — and that Spotify co-founder/CEO Daniel Ek needed to reduce royalty payments to show investors the potential for profit. And as streaming became the dominant means of music consumption, UMG, like other labels, needed the service to convert more users of its controversial free tier into the subscribers that are fueling the recovery of the recorded-music business. “It was like the U.S. and Soviet Union during the Cold War,” Peter Paterno, a partner at King Holmes Paterno & Soriano, tells Billboard. “Mutually assured destruction.”

Thankfully, no one ever pressed the button: UMG’s music remained on Spotify, even without a long term deal. But no one really backed down, either. Instead, the two companies seem to have struck a deal that gives each side what it needs, even if neither one managed to dictate all of the terms.

“This feels like a very reasonable deal in that Spotify gave the labels the ability to window” — to restrict albums to the service’s paid tier for a limited time — “and in exchange got the discount they needed,” says Jonathan Daniel, a partner at Crush Music, which manages Sia and Lorde, among others.