Spotify's deal with Universal Music just moved it a step closer to an IPO, securing Adele, Taylor Swift, Lady Gaga, Kanye West and other top artists

Lynsey Barber
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Universal Music and Spotify have agreed a new deal (Source: Getty)

Spotify has moved a step closer to a highly anticipated IPO after sealing a deal with Universal to stream music from artists such as Adele, Taylor Swift, Lady Gaga and Kanye West.

Agreeing the global multi-year deal had been seen as one of the obstacles the startup faced in going public.

The deal includes artists' music only being available on the premium version of the service for the first two weeks after they release an album, if they wish, but singles available on the free version.

Read more: SoundCloud: Music streaming isn't "winners take all" market

Spotify will still need to negotiate further deals with Sony and Warner, in addition to Vivendi-owned Universal, in order to secure access to the majority of the 30m songs users can stream on the platform.

But the deal represents the end to contracted negotiations and tussles between the two sides over the years.

Universal artist Taylor Swift famously pulled her music from the platform in 2014 and label mate Adele shunned it for the release of her album 25 a year later, eschewing digital services altogether for its release. According to the Financial Times, there has been no long-term contract between the two for two years.

"We will be working together to help break new artists and connect new and established artists with a broadening universe of fans in ways that will wow them both. We know that not every album by every artist should be released the same way, and we’ve worked hard with Universal to develop a new, flexible release policy," said Spotify boss Daniel Ek.

"Starting today, Universal artists can choose to release new albums on premium only for two weeks, offering subscribers an earlier chance to explore the complete creative work, while the singles are available across Spotify for all our listeners to enjoy."

Read more: Spotify users are happy to splash the cash for their top artists

Universal Music boss Sir Lucian Grainge said: "Today, streaming represents the majority of the business. Our challenge is transforming that upturn into sustainable growth."

"In a market this dynamic, one evolving more rapidly than ever before, success requires creative and continual re-evaluation of how best to bring artists’ music to fans. At UMG, we’ve not only reimagined distribution models and technologies, but entire business models. The only constants must be great music and fair compensation for artists and creators. To that end, the long-term success of Spotify, and others like it, is essential to the ecosystem’s enduring health."

Spotify is the most highly funded tech startup in Europe at $8.5bn and an IPO is expected to come soon. It has yet to make a profit, but its second-largest investor Northzone indicated late last year it was closing in on the milestone. Revenues doubled to €2bn in 2015, the latest figures available, while losses grew 10 per cent to €173m.

The Sweden-based firm last month said it had hit 50m paying subscribers, up from 40m in September 2016. It is facing competition from growing rivals such as Apple, which has gained half that number in a shorter time.

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