Why Spotify, UMG Windowing Deal Won’t Work
With yesterday's announcement that Spotify and Universal Music Group had struck a multi-year licensing deal came to revelations: 1) the music streamer would pay lower streaming rates IF it delivered specific higher revenue targets and 2) some new releases would not to available to free users for two weeks in an effort to encourage them to become paid subscribers.
As part of a new licensing deal Universal Music Group has convinced Spotify to break with its longstanding 'free for all' policy and allow windowing of some new releases to paid subscribers only. The goal is to encourage more Spotify users to subscribe, which in turn drives more revenue.
In this new deal, more revenue leads to lower per stream rates for Spotify. It sounds like I win/win for Spotify and UMG, but it won't work.
Artists and labels want hits. Total streams help determine chart position and what is a hit. Would Drake or Ed Sheeran have broken records and topped multiple charts if 50+ million Spotify free users couldn't stream their new release?
Casual fans will wait. The Spotify, UMG window for paid users is short, and casual fans will be fine with waiting 2 weeks to hear a new album. Plus, during those 14 days, the curious can always pop on YouTube or Pandora to get a taste.
Some will return to piracy. They've resisted paying for Spotify, just like wouldn't pay for downloads. Why will they change now? (Are UMG, Labels Encouraging Spotify's 50 Million Free Users To Become Pirates?)
Spotify still won't have everything. Many high profile releases will still not be immediately available to Spotify users, whether or not they pay. Apple Music is still publically committed exclusive releases and is willing to pay for them, and Tidal still has artist/owners committed to growing their business.
Yesterday's deal marks a new era of co-dependent fueled cooperation between music streamers and the recorded music industry; and Spotify may still deliver the hoped for revenue targets. But it will be because more consumer discover the joys of a 35 million track catalog, and not because of two week release windows.