Streamer to market?
Spotify might look to launch an IPO later this year on the back of deal with Universal Music Group (UMG) that bolsters its business model and makes it look a far better punt for investors. Recent reports had suggested that the music streamer, which boasts 100 million users (40 million of them paying), had been waiting until 2018 to go to market but yesterday’s headline Universal announcement could change that.
Recent estimates have suggested a valuation as high as $13 billion for Spotify, though that might edge up following the UMG tie-up, especially if consumers keep signing up for streaming services in number.
Spotify’s deal with the record company is a global, multi-year license agreement that reportedly gives the streamer far better rates if it meets user-growth targets. That would mean an end to the 70% revenue cut music majors generally demand from streaming services, a take which has severely hamstrung streamers from turning a profit.
As part of the agreement, Universal artists will be able to opt for premium windowing and choose to release albums for two weeks to give Spotify subscribers an earlier opportunity to listen to their new content in its entirety. The streamer is also offering Universal ‘unprecedented access’ to data to create ‘the foundation for new tools for artists and labels to expand, engage and build deeper connections with their fans’.
The record company says the industry currently faces the challenge of transforming the recent uptick in global streaming activity into sustainable growth in a highly dynamic market. “At UMG, we’ve not only reimagined distribution models and technologies, but entire business models.”