Universal Music Group is aiming to seize back control over music streaming. It hopes a deal with a rival of Spotify Technology can put artists—and their music labels—back at the heart of the industry.
Universal (ticker: UMG. Netherlands) said Wednesday that it has struck a deal with
Deezer
(DEEZR. France), a European rival of
Spotify
(SPOT), for a new streaming model. It will pay out more to professional musicians, while taking away revenue from “non-artist noise audio”—a fightback against the boom in streaming white noise or computer-generated ambient music.
“There is no other industry where all content is valued the same, and it should be obvious to everyone that the sound of rain or a washing machine is not as valuable as a song from your favorite artist streamed in HiFi,” said Jeronimo Folgueira, CEO of Deezer, in a joint company statement.
Universal shares were up 2% in Amsterdam on Wednesday, while Deezer rose 2.4% in Paris trading.
The move could pressure Spotify, as well as other music-streaming providers such as
Apple
(AAPL) and
Amazon.com
(AMZN). However, the new model comes at a delicate time for Spotify as it tries to negotiate deals with music labels while satisfying investor pressure to increase its margins.
“Investors are focused on Spotify’s new agreements with certain labels (as part of recent price increases) and whether (and to what extent) they benefit Spotify,” Truist Securities analyst Matthew Thornton wrote in a research note on Wednesday.
Spotify stock is up 1.7% on Wednesday, and the stock has more than doubled this year so far but remains well below its Covid-19 pandemic heights.
Universal is in talks with streaming platforms including Spotify and smaller players Tidal and SoundCloud about changing the way they pay royalties, the Financial Times reported. Spotify didn’t immediately respond to a request for comment on Wednesday.
Universal and peers such as
Warner Music Group
(WMG) are fighting hard for a bigger slice of the pie as developments such as artificial intelligence threaten to revolutionize the music industry. Barron’s has previously written that the music labels could benefit from a general rise in subscription prices across the industry.
Write to Adam Clark at [email protected]
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