Spotify Moves One Step Closer to IPO With Possible Warner Royalty Deal
Spotify is close to signing the last big music royalty deal it needs for a U.S. stock market listing in a deal with Warner Music Inc expected to close by September, Reuters reported.
The precise revenue split and size of potential upfront payment to Warner have yet to be agreed upon, but once they are ironed out, Spotify and Warner could come to a "very quick transaction." Warner is pushing for a 52% share of the music royalties, which is in line with other labels. Spotify wants a 50-50 revenue split.
The Swedish music streaming company's financial stability depends on its ability to strike licensing contracts at low royalty rates. Even as the world's most popular streaming music service, Spotify faces competition from Amazon.com (AMZN) - Get Amazon.com, Inc. Report and Apple Inc (AAPL) - Get Apple Inc. Report , who can subsidize their ventures into streaming with money made in other businesses.
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Spotify recently inked licensing deals with Vivendi's (VIV) - Get Telefonica Brasil SA Report Universal Music Group and Sony Corp's (SNE) - Get Sony Corp. Report Sony Music. For lower royalty rates, Spotify reportedly agreed to release new albums to paying subscribers only for the first few weeks before offering albums to free users.
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