Universal Music Group (UMG) is making a bold move to reclaim control over the music streaming landscape. In an effort to put artists and their labels back at the forefront of the industry, UMG has struck a deal with Deezer, a European rival of Spotify. This collaboration aims to revolutionize the streaming model, allowing professional musicians to receive higher payouts while combatting the surge in streaming white noise and computer-generated ambient music, which has taken away valuable revenue.
Valuing Content: Reviving the Artists' Voice
Jeronimo Folgueira, CEO of Deezer, expressed that it is crucial to acknowledge the varying value of different types of content. In a joint statement released by both companies, Folgueira stated, "There is no other industry where all content is valued the same, and it should be obvious to everyone that the sound of rain or a washing machine is not as valuable as a song from your favorite artist streamed in HiFi."
Following this exciting announcement, Universal shares witnessed a 2% surge in Amsterdam trading, while Deezer experienced a 2.4% increase in Paris trading. This positive market response underscores the potential impact of this groundbreaking partnership.
The Changing Landscape for Music-Streaming Providers
The music-streaming industry is undergoing a significant shift that could have far-reaching implications for companies like Spotify, Apple, and Amazon.com. Spotify, in particular, finds itself at a crucial juncture as it seeks to strike favorable deals with music labels while also meeting investors' demands for improved profit margins.
According to Truist Securities analyst Matthew Thornton, investors are closely watching Spotify's negotiations with specific labels and the potential benefits these agreements may bring, especially in light of recent price increases. The outcome of these discussions will likely have a substantial impact on Spotify's future.
While Spotify's stock has shown promising growth, with a 1.7% increase just today and a total increase of over 100% so far this year, it still lags behind its pre-Covid-19 pandemic heights. This suggests that there is room for further improvement and underscores the importance of successfully navigating the current challenges.
In an effort to reshape how royalties are paid, Universal Music Group has engaged in talks with several streaming platforms, including Spotify as well as smaller players like Tidal and SoundCloud. These discussions, as reported by the Financial Times, signal a potential shift in the way artists are compensated for their work. It remains to be seen how Spotify will respond to this proposed change.
As of now, Spotify has not issued a comment regarding the reported talks with Universal.
The Battle for a Bigger Slice: Universal and Peers in the Music Industry
Universal, along with its peer, Warner Music Group (WMG), is fiercely competing for a larger portion of the pie as revolutionary advancements like artificial intelligence loom over the music industry. As we have mentioned before, music labels have the potential to reap the rewards of a widespread increase in subscription prices within the industry.