Spotify’s eagerly anticipated IPO has drawn a step closer after the music streaming service successfully concluded a licensing deal with Warner Music, the final piece of the jigsaw in its move towards a stock market debut.
The agreement draws two years of tortuous negotiations to a close and secures the long-term listing of Warner’s music on the service – something which had been in doubt amidst a disagreement over royalty payments for the use of their songs.
Stability will give investors’ confidence to put their money into Spotify in a crucial next phase for the music provider which has found turning a profit as elusive as ever despite adding paid subscribers at a breakneck pace - hitting 60m for the first-time last month.
Last year Spotify managed to increase revenues by 50% to €2.9bn but this wasn’t enough to offset ever rising royalty and distribution fees.
In an effort to place itself on a more sustainable footing Spotify managed to negotiate a reduction from 55 to 52 cents per dollar in licensing payments to Universal Music and Sony Music - but Warner Music hasn’t commented on the specific terms of its own deal.
Ole Obermann, chief digital officer of Warner Music, said: “It’s taken a while to get here, but it’s been worth it, as we’ve arrived at a balanced set of future-focused deal terms.”