Universal Music Group confirmed Wednesday that it would be selling half of its 3 percent stake in Spotify — a deal worth as much as $1.4 billion based on the streaming service’s valuation as of April 29 — and thanks in part to Taylor Swift, all of UMG’s roster of artists stand to be cashing in too.
How Swift has anything to do with this windfall is a bit complicated, and goes all the way back to the major record labels’ original licensing agreements with Spotify from the late 2000s, which got the companies stock in the then-fledgling streaming service. Credit where it’s due, as Music Business Worldwide reported back in 2016, with no legal requirement to do so, Warner Music Group and Sony Music Group had both committed to doling out some of the profits to the artists if they sold their Spotify stock. UMG confirmed it’d do the same nearly two years later, about a month before Spotify’s IPO.
Taylor gets more crucial here in the specifics. Sony sold first, selling off a portion of its Spotify stock after the IPO in April in 2018. Warner did the same a few months later, selling the company’s entire Spotify stake. But the two music companies’ methods of payment had a significant difference. When Sony paid out, it ignored whether or not an artist is recouped, meaning that Sony acts got paid regardless on if they owed the label money on their record deal. Warner, however, kept recoupments in consideration, so the label kept more of the profit.
The same year, Swift was negotiating her deal to join the world’s biggest music company. During that process, while UMG had already committed to paying out artists on Spotify stock sales, Swift asked UMG to commit that the deal would be non-recoupable. It was a particularly shrewd move on her part that guaranteed a better deal for thousands of more artists around her as well, and the sort of move only an artist of her stature could make a reality.
It wasn’t her first time drawing a line in the sand around the early days of streaming. In 2015, she penned an open letter to Apple on Tumblr to push Apple Music to pay out artists on free trials it was offering. Soon after, Apple’s Eddy Cue confirmed to Billboard that her letter caused Apple to change course. Meanwhile, Swift famously removed her music from Spotify in protest of low payouts compared to album sales, with her music returning in 2017.
At the time of her signing with UMG in November of 2018, Swift said that non-recoupable term on the Spotify stock sales “meant more to me than any other deal point.”
“They have generously agreed to this, at what they believe will be much better terms than paid out previously by other major labels,” Swift wrote in 2018, giving her thanks to UMG CEO Lucian Grainge.
At press time, it’s unclear how much the artists will get paid, how much will be divided among the roster versus to the company and its shareholders and when these payments will go out. (WMG paid out $126 million to its artists from its 2018 stock sale.)
In a press release, UMG said artists’ share would be “consistent with the Company’s approach to artist compensation.” Presumably, that means UMG would dole out payments akin to how it handles other types of windfalls such as lawsuit settlements, where payments get determined based on artists’ royalty deals and their share of the streaming pie. At its highest, the biggest artists on the roster could stand to make millions.
“I see this as a sign that we are headed towards positive change for creators,” Swift wrote of the stock terms back in 2018 after signing with UMG, “a goal I’m never going to stop trying to help achieve, in whatever ways I can.”
