Spotify and UMG ink multiyear deal to boost artist monetization and innovation

The news: Spotify and Universal Music Group (UMG) announced a multiyear partnership focused on innovation, artist monetization, and global listener expansion.

• The deal includes direct licensing between Spotify and UMG’s publishing arm in the US and other markets, marking the first such agreement for Spotify since the 2018 Music Modernization Act, which revamped licensing rules to better account for streaming.
• Key features include new subscription tiers, bundling of music with nonmusic content, and expanded audio-visual catalogs.
• Both companies emphasized their commitment to “artist-centric principles” and addressing issues like fraud and misattribution amid rising concerns about AI-generated music siphoning revenues from legitimate creators.

Why it matters: This partnership highlights continuing efforts to balance streaming growth with equitable creator compensation in the music industry.

• By addressing concerns over revenue distribution, the deal aims to improve payment structures for artists and songwriters.
• Spotify’s previous bundling of audiobooks with music had sparked backlash and legal challenges over royalty payments. The new deal indicates revised terms, reflecting a move toward compromise on such disputes.
• UMG’s approach prioritizes subscription value and exclusive content over sheer scale, signaling a shift in industry priorities.

State of play: Spotify and UMG’s deal addresses broader challenges in digital audio, where slow market growth and monetization gaps persist.

• Digital audio ad spending will increase by just $1.62 billion between 2024 and 2028, with the total market growing less than 5% during this period.
• Spotify's US listener growth is projected at 1.9% annually through 2028, with digital audio’s share of total media ad spend dropping from 4.5% in 2024 to 3.5% by 2028.
• Terrestrial radio, though declining, still outperforms digital audio in ad revenue per user, creating growth headwinds for Spotify.
• Spotify’s non-podcast ad revenues, projected to surpass $1 billion in 2025 (see chart), demonstrate how podcasting and ad-supported content are helping offset these challenges.

Our take: The deal underscores the streaming industry’s evolution, balancing innovation with demands for fairer creator compensation.

• While streaming has revitalized the music business, financial disparities between platforms and creators remain unresolved. This agreement could set an example for partnerships aimed at addressing these concerns.
• Music companies are increasingly leaning into exclusive, value-driven offerings to sustain subscriber growth. For Spotify and UMG, meeting the expectations of artists, songwriters, and audiences will remain critical.

Go further: Read our latest Audio Ad Spending report.