Universal Music Group confirmed on Wednesday that it will sell half of its 3 percent stake in Spotify — a deal worth up to $1.4 billion based on the streaming service’s valuation as of April 29 — and thanks in part to Taylor Swift, UMG’s entire artist roster will benefit as well.
How Swift relates to this windfall is a bit complicated, and goes back to the major record labels’ original licensing deals with Spotify from the late 2000s, which received corporate shares in the then-nascent streaming service. Credit where it’s due, as Music Business Worldwide reported in 2016, with no legal requirement to do so, both Warner Music Group and Sony Music Group have committed to distributing some profits to artists if they sell their shares in Spotify. UMG confirmed It would do the same about two years later, about a month before Spotify’s IPO.
Taylor becomes more important here in the details. Sony sold first, selling a portion of its Spotify shares after its IPO in April 2018. Warner did the same a few months later, selling the company’s entire stake in Spotify. But the payment methods followed by the two music companies had a significant difference. When Sony made the payment, they ignored whether the artist was refunded or not, meaning that Sony was paid regardless of whether they owed the company money in their recording deal. However, Warner took recalls into account, so the brand retained more profits.
In the same year, Swift was negotiating her deal to join the largest music company in the world. During the process, while UMG had already committed to paying artists in Spotify stock sales, Swift asked UMG to commit that the deal would not be refundable. It was a particularly smart move on her part that secured a better deal for thousands of other artists around her as well, the kind of move only possible for an artist of her stature.
This wasn’t the first time she’d drawn a line in the sand in the early days of streaming. In 2015, I wrote an open letter to Apple on Tumblr to push Apple Music to pay artists for the free trials it was offering. Shortly after, Apple’s Eddy Cue confirmed to Billboard that her message caused Apple to change course. Meanwhile, Swift removed her music from Spotify in protest of lower payouts compared to album sales, with her music returning in 2017.
At the time of her signing with UMG in November of 2018, Swift said the non-refundable clause in Spotify stock sales “meant more to me than any other deal point.”
“They have generously agreed to this, on what they believe will be much better terms than what other major brands have previously paid,” Swift wrote in 2018, thanking UMG CEO Lucian Grainge.
At press time, it is unclear how much the artists will receive, how much will be split between the roster versus the company and its shareholders and when those payments will be made. (WMG paid $126 million to its artists from the 2018 sale of its stock.)
In a press release, UMG said the artists’ share would be “consistent with the company’s approach to artist compensation.” Presumably, this means UMG will distribute payments similar to how it handles other types of windfalls like lawsuit settlements, where payments are determined based on artists’ royalty deals and their share of the streaming pie. At its highest levels, the biggest artists on the list could earn millions.
“I see this as a sign that we are moving toward positive change for creators, a goal that I will never stop trying to help achieve, in any way I can,” Swift wrote of the stock terms in 2018 after signing with UMG.
