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

This agreement comes after Spotify migrated over 99% of US subscribers to bundled packages in March 2024, which significantly reduced royalty payments to publishers and songwriters. The new UMPG direct deal reportedly provides substantially better payouts than the statutory mechanical royalties currently paid to other publishers, particularly for bundled plans.

Key aspects of the agreement include:

• Direct licensing between Spotify and UMPG, bypassing standard statutory rates
• Support for UMG's "Streaming 2.0" vision
• Enhanced artist-centric principles
• 1,000-stream-per-annum threshold for payment triggers
• Protection against fraudulent activity and AI-generated content

Sir Lucian Grainge, UMG's Chairman and CEO, confirmed that the partnership advances artist-centric principles to drive greater monetization for artists and songwriters while enhancing consumer product offerings.

The deal may trigger similar demands from other major labels like Warner Music Group and Sony Music Entertainment, potentially leading to industry-wide changes in streaming royalty structures. While other publishers currently maintain existing payment rates, this agreement could reshape the dynamics between streaming platforms and music rights holders.

The move represents a significant shift from the framework established by the Music Modernization Act of 2018, suggesting a new era in digital music licensing and compensation.

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