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Monday, May 1, 2017

Spotify Makes New Deal with Independent Artists

On Thursday, music streaming service Spotify said that a licensing deal that they had signed nine years ago has been renewed with independent digital agency Merlin. Even as Spotify becomes more mainstream, the deal has proven to be essential for ensuring the service remains appealing in the eyes of dedicated music fans. 20,000 independent record labels are represented by Merlin, which are spread out in over 51 countries. This is about 21% of the global digital recorded music market. The company said that with this deal, Spotify becomes the fourth largest partner and is only behind major labels like Warner Music, Universal and Sony.

This agreement was made only a few weeks after Spotify had made a licensing deal with Universal that would prove to be useful in making the music streaming platform more attractive for top-selling artists. This list of artists include some great names like Adele, Coldplay, Taylor Swift, Kanye West and Lady Gaga. The deal would allow the service to release albums of these artists exclusively to its premium paying subscribers. As of last month, Spotify is the top music streaming site in the world as it doubled its paying subscribers in the last two years and reached the milestone of 50 million.

As far as rival Apple Music is concerned, statistics collected last December revealed that it had about 20 million subscribers. Spotify’s stable includes classic British independent labels such as Sub Pop and Beggars Group, US label called Mad Decent, which has distributed everything from Brazilian and African funk to artists like Outkast, Kobalt Music that licenses the music of Prince and also German electronic music label !K7. According to banking resources, Spotify is giving some thought to market listing in the United States within the year. Currently, the company is building offices in New York as well as exploring market worldwide, but has yet to show a profit.

Nonetheless, the music platform is doing all it can for avoiding the traditional initial public offering (IPO) and wishes to go for a direct share listing. This has been reported by the Wall Street Journal earlier and was later confirmed by a source with knowledge of the plan. This means that existing employees and also investors of Spotify who have stock options in the service will have their shares registered. This will allow them to trade the shares freely whereas it would prevent the company from working with underwriters for placing new shares or raising extra money.

The last funding round conducted by Spotify was back in 2015 and it succeeded in raising about $526 million. At that time, the company’s valuation had reached $8.5 billion. In the very same year, it lost 173 million Euros, but its recent deals with labels and the chances of listing in the stock market would greatly reduce the cash needs of the firm. Based in London and Amsterdam, Merlin also licenses digital licenses to some of Spotify’s competitors, which includes names such as YouTube Red, Google Play, Deezer, Pandora and SoundCloud. 

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