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Managers criticise the continued secrecy as Universal agrees new Spotify deal

Managers criticise the continued secrecy as Universal agrees new Spotify deal

Spotify, the loss-making music streaming service, has signed a long-term licensing deal with Universal Music Group (UMG), which will put some new albums behind a temporary paywall.

"Starting today, Universal artists can choose to release new albums on premium only for two weeks, offering subscribers an earlier chance to explore the complete creative work, while the singles are available across Spotify for all our listeners to enjoy", Mr Daniel Ek, chief executive and co-founder of Spotify, said in a statement.

Under the new deal, Spotify, unlike its industry rivals, will get first dibs on music from some of the world's most popular artists. And as streaming became the dominant means of music consumption, UMG, like other labels, needed the service to convert more users of its controversial free tier into the subscribers that are fueling the recovery of the recorded-music business.

However, the move would allow Spotify to save on the pricey underwriting fees associated with an IPO, said WSJ sources.

In exchange, Spotify is getting a concession of its own: a reduction in royalty rates.

More news: Texting and driving enforcement campaign begins Tuesday

A normal IPO involves a company issuing shares of stock. And UMG, which accounted for 35.7 percent of the US recorded-music market in the first quarter of 2017, according to Nielsen Music, often sets the pattern for the structure of digital deals.

Spotify, which a year ago issued a 1 billion United States dollar convertible bond (£801 million), was publicly valued at 8.5 billion U.S. dollars (£6.8 billion) in 2015.

For Spotify, the deal removes a major obstacle to going public.

The ability to limit music to Spotify's paid tier may no longer be as valuable as it would have been a year ago, however.

Artist managers argue that they need to know more detail about the deals done between the labels and the streaming services, so that they can properly audit the streaming royalties their artists receive.

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