Spotify has reached a groundbreaking multi-year agreement with Universal Music Group (UMG) that addresses controversial bundling practices and royalty payments. The deal includes a first-of-its-kind direct licensing arrangement with Universal Music Publishing Group (UMPG) in the United States and other regions.

Key aspects of the deal:

• UMPG will receive higher payouts than statutory mechanical royalties, particularly for bundled plans
• The agreement supports UMG's "Streaming 2.0" vision for fairer artist and songwriter compensation
• Maintains artist-centric principles, including the 1,000-stream annual threshold for payments
• Includes new subscription tiers and enhanced audio-visual experiences

This agreement comes after Spotify moved 99% of US subscribers into bundled packages in March 2024, leading to reduced royalty payments for publishers and songwriters. The new deal may trigger similar demands from other major labels like Warner Music Group and Sony Music Entertainment.

Sir Lucian Grainge, UMG's Chairman and CEO, emphasized that this partnership advances their vision for music subscription evolution and ensures greater monetization for artists and songwriters while enhancing consumer offerings.

The direct licensing component is particularly significant as it bypasses the Music Modernization Act of 2018's framework, potentially setting new precedents for streaming platform-publisher relationships. While other publishers currently remain under standard statutory rates, this deal could reshape the industry's approach to streaming royalties and bundled content offerings.

This development marks a potential shift in the power dynamics between streaming platforms and music rights holders, with major implications for future industry negotiations and royalty structures.

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