Spotify IPO draws nearer on back of Warner Music licensing deal

Spotify IPO draws nearer on back of Warner Music licensing deal

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.”

Spotify concluded months of negotiations with Sony Music to strike a separate licensing deal last month.

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John Glenday

John Glenday is responsible for compiling The Drum's daily morning bulletin and ensuring that overnight breaking news is covered while you're still brushing your teeth. Can also make a mean cup of tea.

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