Analytic Dreamz: Notorious Mass Effect - "SPOTIFY'S LONG-TERM DEAL WITH UNIVERSAL MUSIC GROUP (UMG) EXPLAINED"

Episode Date: May 27, 2024

Linktree: ⁠https://linktr.ee/Analytic⁠Notorious Mass Effect: Spotify & UMG Strike a Long-Term Deal - Winners & LosersThis segment of Analytic Dreamz dissects the recent long-term licensing agreement between Spotify and Universal Music Group (UMG). We break down the impact on various players in the music industry.Key Wins:Spotify: Secures crucial music rights for its IPO, potentially lowers royalty payouts, and offers album exclusivity for paid subscribers.UMG: Gains favorable royalty rates, enables artist exclusivity windows, and fosters deeper collaboration on artist promotion.Music Industry: Streaming solidifies its dominance, major labels benefit from Spotify's growth, and legitimacy strengthens.Potential Challenges:Some Artists: Exclusive windows might hinder reach, and free-tier limitations could push users away.Competing Services: Pressure mounts to match UMG's deal, potentially impacting royalty structures and exclusivity.Investors: Spotify's IPO gains a boost, potentially at the expense of short-term revenue (artist exclusivity).Overall, this deal significantly reshapes the streaming landscape. We analyze the implications for artists, competitors, investors, and the future of music distribution.Join us for an insightful discussion on Spotify's power play and its impact on the music industry.Privacy & Opt-Out: https://redcircle.com/privacy

Now, Spotify has just inked another long-term deal with Universal Music Group. As because of this licensing deal, a lot of artists under the Universal Music Group umbrella is going to be affected by this. So basically, to put it in perspective, Universal Music Group when it comes to the entire distribution of music on Spotify has, 83% of the market share as far as the up-to-date charts. So with that being said, the next closest is Sony Music Entertainment with 11%, Warner Music Group with 5% and of course all of the other independent artists at 1%. So what does that tell you? Universal Music Group is unequivocally the big dogs of the music

industry. Now if you want to see the contract or the statement that both companies put out go to analytic dreams video on Spotify to see the video along with the audio. But basically the whole securing of this long-term licensing deal of course is crucial for the IPO plans. It's crucial for new albums that's going to come from Universal Music Group artists and it's crucial for the Spotify tiers as far as when people subscribe to the platform. Also, to take it back to all, well, to take it back to 2008, Universal Music Group was one of the first, but also was amongst other major record label companies to receive equity

stake in Spotify due to their licensing agreement with the streaming service. And of course, due to the investments and the share adjustments, UMG's percentage started to increase simply for the fact that Spotify went public in 2018. So with that being said, there's a lot of things that goes with this licensing deal that I could get into. I don't want to bore y'all with all the little details.

But what I do want to say is that Universal Music Group should be regarded as the big dogs when it comes to the music industry. The 1% of the 1% as far as music creators are assigned to Universal Music Group. And that's no coincidence. From the likes of Taylor Swift, Drake, Kanye West, I could probably think of others. There's so many subdivisions on a Universal Music Group. but basically everybody's under universal right so because everybody is under universal that's why the market share as far as up to date um as far as april 29th is the way it is as far as market share universal music

group has 83% and that's the well the second closest is 11% so basically what i'm saying is because of the dominance for such a long period of time and it's not just this month. It's always been like that. So because of that, if Universal Music Group were to sell its Spotify stock, I don't think people realize the amount of money that they will make from it and the respective artists would make from it. because as of today from all the research that I put together and stuff it said that Spotify's current market cap is of 63.86 billion with a B. Universal Music Group's stake in Spotify is estimated to be around 4.2 to 4.8. So y'all do the math on that.

Obviously, at the end of the day, the conclusion is everybody associated to Universal Music Group. As far as the ones who contributed, talking about the artists, would probably receive around 500 million or more. So that is how substantial Universal Music Group is when it comes to the Spotify platform. Also, that is why when I covered Universal Music Group versus TikTok, I was under the assumption that TikTok was just going to fold and end up giving and conceding to whatever, or confiding into whatever Universal Music Group wanted. But obviously, that's not the case. And now we see the actual government is trying to shut the whole platform down.

So it's very interesting how certain platforms end up dying out when they don't adhere to Universal Music Group's requests. But then others seem to get supreme boost in sales whenever they meet the expectations of Universal Music Group when it comes to overall industry payments. So with that being said, of course, we're not going to spend too much time on that. far as the numbers side but just talking from a broad perspective right stream and services gain further legitimacy as the dominant music distribution model because if you don't know back in the day you have you had vinals you have cassette tapes you had DVDs all type of physical ways to listen to music now you press a button and you have a whole album at your disposal the only thing with that that I believe is the biggest downside is you don't own the music if they want to change the version

well guess what the version you was listening to no longer exists that's why downloading a.k.a buying music is still a coveted commodity because who wants to have an album that you love and just have it changed in a blink of an eye and you can never get that version back that is the biggest downside to streaming but as far as being able to ex as far as being able to have access to a plethora of music that is where streaming is undoubtedly the best when it comes to listening to music but if you want to own a certain version forever downloading and buying is always the best option in my opinion so that is why this deal is such a huge well no pun intended it's such a huge deal well literally as a lot of companies collaborate with Spotify, of course, to promote and give social tools to the artists.

But as far as University Music Group having such a dominant hold on the overall market share, which I keep repeating, is 83%. And the next closest is Sony with 11. So think about that. Having such dominance, when you go to the negotiation table, obviously Spotify has to come off some of the practices. is simply for the fact that you're not dealing with just your everyday label, right? So some people would say on the flip side, artists are losing in this negotiation because the label is making all the money while the artists are set to be splitting a pie like it's the NBA.

The way it's been broken down to me from people in the music industry is similar to the NBA, how the top performers are paid a certain amount. But where it's not similar is recently the top performers are now getting percentages over people under the same label simply for the fact that they're the ones driving the engagement and exposure for that specific company. Prime example, Drake and Taylor Swift. Now, there are NDAs whenever you sign certain contracts who will never know the specific legalities when it comes to a Drake or Thaler Swift. Taylor Swift, but as far as the broad spectrum, one could assume that because of these new practices being put in place, Drake and Taylor Swift makes a percentage off of every dollar that every musician makes under Universal Music Group. So just think about that. So whenever you're

working a job, you're outperforming everybody. Would you want a certain salary, or would you want a salary plus the percentage of everybody else who's also getting customers because now you're getting a influx i forget that word overflow of engagement right to the point where it trickles down to the rest so that is basically how i presented because some people will say well that's unfair well if you was at your job outperforming everybody by a landslide you will want a year unique deal that others would think is unfair as well. So that's why Drake and Taylor Swift is at the top when it comes to that. And so it also gives a whole other meaning to the Drake disc track, drop and give me 50.

Because of course, Kendrick is independent, but if he ever wanted to get under Universal Music Group, he may have to not give 50% of course, a little exaggeration, but may I have to give a little percentage to the boy. You know what I mean? So overall, as of 2023, Spotify has been, has paid over 48 billion to the music industry, including $9 billion during last year alone. And as far as this specific deal, this basically just ensures better royalty rates from Spotify when it comes to UMG, specifically tied to ambitious revenue growth targets in a

enables artists to release albums exclusively on Spotify's paid tier for initial weeks after launch. So don't be surprised if you see certain musicians coming out and saying, oh, this album is only on such and such platform for the foreseeable future. Don't be surprised if you see that from a premier artist. So what else? That's basically it. Universal Music Group once again showcases how dominant they are in the music landscape. and I just looking at the numbers week after week year after year is really no other label catching up to Universal Music Group.

I mean, when you have Taylor Swift, Ed Sherrin, Justin Bieber, Adele, Drake, Beyonce, it's obviously one of those things where the other major label just can't catch up. And so now you get to a point where if Universal Music Group wanted to create their own music platform, platform, they literally could because of the amount of sheer influence they have over the culture when it comes to music. So anyways, in summary, this whole deal between Spotify and Universal Music Group will reshape how people look at streaming services as far as bringing in income and as far as impacting artists, investors. But at the end of the day, it still pushes the agenda that the, the, you know, the,

Spotify position in the music industry when it comes to Apple music, Amazon, music, things of that nature, it still solidifies it as a top music distribution platform amongst the rest. So with that being said, click my link to you in my bio. Let me know one of my social medias. What do you think about Spotify's long-term deal with Universal Music Group? and what was the biggest standout to you throughout this segment?