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

Key aspects of the new agreement:

• Direct licensing between Spotify and UMPG, bypassing standard statutory mechanical royalties
• Higher payouts for UMPG compared to other publishers, particularly for bundled plans
• Modification or potential elimination of bundling-based discounts
• Support for UMG's "Streaming 2.0" vision for fairer artist compensation
• Continuation of artist-centric principles, including the 1,000-stream annual threshold

This deal comes in response to Spotify's aggressive bundling strategy, which had pushed 99% of US subscribers into combined music and audiobook packages by early 2024, resulting in reduced royalty payments to publishers and songwriters.

The agreement could trigger similar demands from other major labels like Warner Music Group and Sony Music Entertainment, potentially reshaping the streaming industry's royalty structure. Sir Lucian Grainge, UMG's Chairman and CEO, praised the deal as advancing their vision for the next evolution of music subscription services.

This development follows months of industry tension, including legal action from the Mechanical Licensing Collective (MLC) against Spotify's bundling practices, and represents a significant shift in the relationship between streaming platforms and music rights holders.

For other publishers and songwriters, Spotify's existing payment structure remains unchanged, though this deal could set a precedent for future negotiations across the industry.

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