Opening Bell 4.2.20 - Dealbreaker

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AGREE TO RE-AGREE

Spotify and music label Warner Music Group announced that the two came to a deal yesterday, and have agreed to a new global licensing agreement after a year-long battle surrounding Spotify’s expansion into India.

No financial details were disclosed by either firm but the agreement will allow listeners in India to jam out to Cardi B while they shelter-at-home during the coronavirus epidemic.

You can’t do that

Things have gotten pretty ugly between the Swedish streaming-service and the globe’s third-largest music label. The two companies couldn’t come to an agreement on terms for expanding into India, so Spotify did what any powerhouse-in-its-industry would do and just went ahead and did what it damn well pleased, citing an obscure provision in India’s copyright law to operate. Warner filed an official injunction, and yada yada yada, 5 months later, here we are. Coronavirus really is bringing us together.

The big issue revolves around what Spotify is paying licensors (read: music labels) to effectively “sell their music” (read: allow me to use my ex’s Spotify account).

In countries like India, Spotify attempts to sell its services for cheaper than it would in a developed country like the United States and, as such, looks to short change record labels. Spotify out here abiding by the Columbia House business model.

But the drama wasn't in a vacuum. It appears that the disagreement was as much about setting the stage for future expansion as it was about India itself.

The bottom line...

And the record companies don’t just have to battle other labels for the fractions of a penny...

The media du jour is podcasts, and Spotify has gone all in. For music labels that means that their cut of the $9.99 Spotify charges users each month could dwindle as podcasts become more successful (and if Spotify's negotiating skills are up to snuff). And as anyone with a coworker that loves true crime will tell you, there’s no shortage of successful podcasts.

$SPOT looks to effectively double-dip on customers and offer more content, and pay music labels less as it builds out its own content library full of original podcasts. Who knew listening to strangers talk would be such a draw?

Spotify Strikes New Deal for Warner Music Catalog [WSJ]

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