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Spotify has struck a multi-year licensing deal with Universal Music, the largest record label in the world, a move that should help open a path towards an initial public offering.
As part of the agreement Spotify will allow artists to choose to restrict their albums to its paid tier for the first two weeks of a release — a large concession after years of friction with pop stars including Taylor Swift, who pulled her music from the platform in 2014.
Record music companies want to limit Spotify’s free service, which generates far less revenues than paid subscriptions.
“We know that not every album by every artist should be released the same way, and we’ve worked hard with UMG to develop a new, flexible release policy,” said Daniel Ek, chief executive of Spotify.
Spotify has been in tough talks for months with the big three music labels – Universal, Sony, and Warner – who control the majority of the 30m songs available on streaming services.
Vivendi-owned UMG had not had a long-term contract with Spotify in nearly two years, according to someone familiar with the matter.
The long-term licensing deals would boost Spotify’s appeal before an IPO, as it looks to convince investors it can translate its fast customer growth into a solid business. The company, which reached 50m paying customers last week, was valued at $8.5bn in a recent funding round. Spotify made a net loss of €173m in 2015, despite revenues surging to €1.95bn, as royalty and distribution fees jumped to €1.63bn.
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