Spotify Inks Temporary Paywall Deal with Top Recording Companies

The digital revolution has completely changed the way we experience—and consume—music. Indeed, the days of venturing out to the record store on the day of a new release is now a bygone era: now you can have immediate access to new music (and stuff you may have never known existed) thanks to online/mobile music streaming apps like Spotify.

But the popularity of these platforms has forced the recording industry to reevaluate its distribution models. And these shifts are actually good for both the consumers as well as the recording artists who want to sell as much of their work as possible in this highly competitive—and congested—industry.

Executives at Spotify have been adamantly opposed to the concept of a pricing structure known as temporary paywalls. Essentially, temporary paywalls make it so that only paid subscribers can have access to new music, at least, for a little while. This is a way, then, for the most popular recording artists in the world can ensure that they get their residual cut from streaming.

This is an important negotiation because Spotify has more than 50 million paid subscribers with a free membership option that often converts people into paying subscribers. That is a major bargaining chip as the music streaming service has been working extremely hard to complete new deals with some of the biggest names in the recording industry, namely: Universal Music, Warner Music Group, and Sony Music Entertainment. These major labels have been smart, too, in that they all own minority stakes in the consistently growing music streaming platform.

As such, the negotiation has really just been a back and forth to find a mutually beneficial way bring new music to fans so that everyone comes out on top. Spotify CEO Daniel Ek explains, “We know that not every album by every artist should be released the same way, and we’ve worked hard with [Universal Music Group] to develop a new, flexible release policy.”

Indeed, Universal Music Group chairman and CEO, Sir Lucian Grainge, notes, “Eight years ago, when streaming was a welcome but small source of revenue, [Universal Music Group] embraced partners like Spotify as a way to help return music to a vibrant future benefitting the entire ecosystem. Working hand in hand with these digital services brought us the industry’s first real growth in nearly two decades. Today, streaming represents the majority of the business. Our challenge is transforming that upturn into sustainable growth.”