Since early 2024, Spotify has been ramming nearly every subscriber into a cut-rate ‘bundled’ package — and boasting about the huge royalty savings while fighting publishers tooth-and-nail. Now, there’s serious pushback coming from Universal Music Group itself — and a brand-new, direct licensing deal with Universal Music Group to deal with the bundling funny business.
Earlier this month, DMN Pro revealed that Spotify had successful migrated more than 99 percent of their subscribers to bundled packages, part of a dramatic shift that started in March of 2024. Now, the pushback is expanding beyond the music industry sector — forcing Spotify to potentially reconsider the royalty downgrades.
According to fresh deal terms confirmed to Digital Music News over the weekend, Spotify and Universal Music Group (UMG) have finalized a multi-year agreement that encompasses both recorded music and music publishing with important direct-licensing components.
Spotify re-ups with UMG every few years, but this time, it’s different — very, very different.
According to an email from Universal, a significant aspect of the agreement is the direct licensing arrangement between Spotify and Universal Music Publishing Group (UMPG) in the United States and other regions. This direct deal is the first of its kind since the Music Modernization Act of 2018 and signals a potential serious shift in the dynamics between streaming platforms and music publishers.
But why would a direct publishing deal be needed if the Music Modernization Act outlined terms for all music streaming platforms (DSPs) and music publishers?
Well, one reason is that the MMA pact is breaking down, with music publishers essentially hating Spotify at this point. that includes UMPG, one the largest publishers in the world, didn’t like the way Spotify was treating them under the MMA, so they brought their bigger brother to the playground.
Leading up to this point, major music publishers — represented by the NMPA and its battling CEO David Israelite — spent a good chunk of 2024 pushing back against Spotify’s bundling shenanigans — which involved significantly lowered royalty payments to publishers and songwriters. The MLC even sued Spotify over the bundling shifts, though Spotify prompted litigated back.
Total US-based Spotify subscribers, November 2024, broken down by tier (Source: DMN Pro).
All of which necessitated a change in the game plan for 2025, with a bigger wave of blowback coming from Universal Music Group. But there are also other aspects to this deal.
In the agreement announcement, UMG said the agreement supports their “Streaming 2.0” vision, which seeks to reshape the economics of music streaming and ensure fairer compensation for artists and songwriters. That includes new product developments and offerings, including new subscription tiers, bundled content offerings, and enhanced audio and visual experiences.
And of course, a reset on bundles combining music and non-music content.
Importantly, the deal also continues UMG’s focus on ‘artist-centric principles,’ which, according to UMG, ensures that artists are rewarded based on their contribution to listener engagement and that their royalties are protected from fraudulent activity.
That includes previously-established rules like a 1,000-stream-per-annum threshold for triggering payments, and weeding out the ‘noise’ of background sounds and AI-generated recordings.
Sir Lucian Grainge, Chairman & CEO of Universal Music Group, expressed his enthusiasm for the deal, stating that it aligns perfectly with UMG’s Streaming 2.0 vision. “When we first presented our vision for the next stage in the evolution of music subscription several months ago—Streaming 2.0—this is precisely the kind of partnership development we envisioned,” Grainge relayed.
“This agreement furthers and broadens the collaboration with Spotify for both our labels and music publisher, advancing artist-centric principles to drive greater monetization for artists and songwriters, as well as enhancing product offerings for consumers.”