Spotify Agrees Limited Free Play

Spotify Agrees Limited Free Play

Spotify Agrees Limited Free Play

Music-streaming service Spotify AB is readying an initial public offering that is expected by year-end.

Thankfully, no one ever pressed the button: UMG's music remained on Spotify, even without a long-term deal.

"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.

"Universal artists can choose to release new albums on premium only for two weeks, offering subscribers an earlier chance to explore the complete creative work, while the singles are available across Spotify for all our listeners to enjoy", he said. But he became more willing to compromise - sources have hinted that Spotify general counsel Horacio Gutierrez played a key role - and the deal couldn't wait much longer.

In exchange, Spotify is getting a concession of its own: a reduction in royalty rates.

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Spotify, which past year issued a 1 billion USA dollar convertible bond (£801 million), was publicly valued at 8.5 billion U.S. dollars (£6.8 billion) in 2015.

A normal IPO involves a company issuing shares of stock. This would benefit Spotify's path to profitability and an IPO.

Spotify has yet to report a profit, partly because the vast majority of its sales go to the record labels and other rights holders of the songs in its library. This release flexibility will allow for the service to actually encourage people to pay for the service rather than just continue using the free version.

The multi-year licence agreement with Universal Music could make Spotify more attractive to Universal Music's artists, who include Taylor Swift, Adele, Lady Gaga, Coldplay and Kanye West. The two companies said that the new deal would "advance their partnership to ensure that streaming realises its full transformational potential for artists, labels and fans". "The focus should be more on a push to limit free".

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