Spotify and Universal Music Group (UMG) have reached a groundbreaking multi-year agreement that addresses controversial bundling practices and publishing 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.

The agreement comes as a response to Spotify's recent practice of moving over 99% of US subscribers into bundled packages combining music and audiobooks, which resulted in reduced royalty payments to publishers and songwriters.

Key aspects of the new deal:

• Direct licensing between Spotify and UMPG
• Higher payouts than statutory mechanical royalties for bundled plans
• Support for UMG's "Streaming 2.0" vision
• Implementation of artist-centric principles
• Enhanced product offerings and subscription tiers

This agreement marks a significant shift in the relationship between streaming platforms and music publishers since the Music Modernization Act of 2018. While specific rate changes remain undisclosed, sources indicate UMPG will receive substantially better payouts than current statutory rates, particularly for bundled plans.

The deal could set a precedent for other major labels and publishers, potentially leading to similar agreements with Warner Music Group, Sony Music Entertainment, and Merlin. Sir Lucian Grainge, UMG's Chairman and CEO, emphasized that this partnership advances artist-centric principles and aims to improve monetization for both artists and songwriters.

The new arrangement also maintains previously established rules, including the 1,000-stream-per-annum threshold for payments and measures to prevent fraudulent activity from AI-generated content and background sounds.

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