Spotify has announced a new multi-year global partnership with Sony Music, the third and final major to sign a new deal with Spotify this year. The deal encompasses both the recorded music and publishing sides of Sony’s business, and according to Spotify, its “new direct licensing arrangement in the U.S.” will result in higher royalties for songwriters.
It’s a notable part of the deal, given Spotify came under fire from music publishers last spring when it started paying a reduced royalty rate to songwriters and publishers in the U.S., resulting in what the National Music Publishers’ Association (NMPA) says was a loss of $230 million in royalties in the first year.
This is because Spotify found that by adding audiobooks into its premium subscriptions, it could reclassify those popular subscriptions as “bundles,” a type of plan that qualifies for a discounted rate on U.S. mechanical royalties given that multiple products are offered under one price tag. The move caught publishers off guard and reignited longstanding tensions between publishers and Spotify about what royalties songwriters should earn.
Sony follows Universal Music Group, Warner Music Group and Kobalt in making these direct deals to, in part, improve remuneration for songwriters post-bundling. It’s unclear if these deals bring these companies’ royalty rates back to the level they were before bundling or not.
In a press release about the deal, limited information is given about the nature of this expanded partnership. According to a press release about the deal, “the companies will work together to keep improving the listening experience while creating more opportunities for artists and songwriters to reach audiences everywhere. These initiatives will launch new product offerings including enhanced audio and visual formats that enable deeper connections with fans.”
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Recently, Spotify has been focused on expanding its offerings. The Stockholm-based company has announced it will now allow for direct messaging, a new DJ feature for playlists and high-fidelity listening — all as part of premium. Late last year, it also rolled out music videos for 97 countries, excluding users in the U.S. and Canada.
“Our partnership with Sony is built on a shared drive to shape the future of music. Together, we’re accelerating the pace of innovation to create powerful new opportunities and increasing revenue for artists and songwriters,” says Daniel Ek, Spotify’s founder and CEO. “These agreements aren’t just a milestone; they’re a catalyst for building a more dynamic and prosperous music ecosystem for everyone.”
Rob Stringer, chairman of Sony Music Group, says: “Sony Music Group and Spotify have long been mutually committed to advancing music streaming and growing the marketplace for all. This is further reflected in our new agreements where we’re working to develop futuristic approaches that ensure our artists and songwriters remain appropriately compensated for their work, and audiences are getting a high-quality experience that’s ever evolving.”
“These deals with Sony Music Group are built to better support artists and songwriters by unlocking new formats and forging deeper connections with fans,” says Alex Norström, co-president and chief business officer at Spotify. “This alignment creates space for new opportunities and long-term growth for everyone involved.”
