After months of negotiations, the world’s largest music streaming service and the world’s largest record label have agreed on a new licensing deal. Spotify and Universal Music Group announced the multi-year contract in a joint statement saying that the partnership is “built on a mutual love of music, creating value for artists and delivering for fans”.
The nature of the deal, which sees both parties make compromises in key areas (such as Universal agreeing on lower royalty rates and Spotify allowing Universal to exclude free users from listening to new releases for up to two weeks), clearly demonstrates the co-dependent relationship between record labels and streaming services. The latter couldn’t survive without the labels’ music and the labels have come to rely on the revenue services such as Spotify provide to them. As Sir Lucian Grainge, Chairman and CEO of Universal Music Group, points out “streaming today represents the majority of the business” and “the long-term success of Spotify, and others like it, is essential to the ecosystem’s enduring health”.
As our chart illustrates, streaming accounted for the majority of the music industry’s revenues for the first time in 2016. With physical sales and music downloads clearly on the decline and streaming subscription numbers higher than ever, it seems as if streaming has finally become too big to fail.