Yesterday, it was reported that YouTube’s licensing agreement with Universal Music Group expired earlier this year, meaning that it has switched to a rolling monthly contract while a new deal is negotiated.
Music Ally can reveal that YouTube is not the only music-streaming service in such a position: Spotify is in a similar month-to-month rolling contract with at least two of the major labels, and if not already, soon with all three.
Our sources indicated that Spotify has entered a rolling contract with Universal Music and Warner Music, although the status of its deal with Sony Music is unknown – but if not expired already, is expected to be soon.
That tallies with the last set of reports on Spotify’s licensing negotiations: in February 2013, The Verge noted that Spotify was renewing its deals with all three major labels. Three years (plus two months) on, and it’s time to renew again.
Isn’t it a problem that the world’s biggest subscription music-streaming service could have any or all of its three biggest licensors drop out at a month’s notice?
It’s not ideal, but at the same time is not a huge problem: the month-to-month agreement can roll on indefinitely while new terms are haggled over, and it would be extraordinarily counter-productive for the labels – who are also Spotify shareholders – to pull out at short notice. Both sides need new deals in place for Spotify to continue on its path towards an IPO.
Also, such ‘at-will’ agreements are hardly unknown within the music industry, with Apple’s iTunes Store a prominent example – albeit in the downloads world not streaming.
This is not quite the same situation as YouTube, then, with MBW claiming that Universal has “put together both an ‘on YouTube’ strategy and an ‘off YouTube’ strategy – the latter very much an ‘in case of emergency’ fallback” – indicating a willingness to at least threaten to pull its catalogue from the video service.
The labels are not YouTube shareholders, and they increasingly see its free tier as unfair competition for the premium tiers of Spotify, Apple Music and other services. YouTube, meanwhile, argues that it is monetising the 80% of music listeners who would never pay for those services.
You can expect to hear more on these arguments later today when the IFPI releases its global industry figured for 2015, and in the coming weeks as the safe-harbour / value-gap debate continues to rumble. Suffice to say that the factors in play in Spotify and YouTube’s respective licensing negotiations are similar in some ways, but very different in others.
To be clear, though: neither company is ‘unlicensed’ under the current state of affairs: their deals have merely shifted into month-by-month contracts.
Spotify and Sony Music declined to comment for this article, while Universal Music and Warner Music had not responded at the time of writing. We will update this piece as and when we receive any more responses.