After a three-year absence, pop megastar Taylor Swift has agreed to rejoin Spotify, Pandora Music (P) and a host of other music streaming services.
You don't need to be a fan of the pop singer to appreciate the significance. Spotify is the world's largest subscription-based on-demand streaming service and Swift is one of the world's most popular music artists.
That the 27-year-old singer has decided to end her long-simmering disagreement with Spotify is a boon for a company yet to reach profitability as well as a recording industry still recovering from the implosion of the CD market more than 15 years ago.
Swift took her music off Spotify in 2014 after the two sides couldn't agree on a licensing fee for her songs when they were played on Spotify's free ad-supported platform. Unlike Apple (AAPL - Get Report) Music, Spotify offers listeners a free service, which pays less per streamed song than music that runs on its subscription service.
Streaming has become the single biggest source of revenue for music labels, eclipsing downloads and CDs. And that's good news for artists and songwriters. Retail music sales jumped to $7.7 billion in 2016 compared to $6.9 billion in 2015 and 2014, according to the Recording Industry Association of America.
Revenue from subscription streaming services more than doubled in 2016, jumping to $2.5 billion as an average of 22.6 million U.S. consumers subscribed to Spotify, Apple Music, Tidal and other platforms.
And while many disagreements remain about the size of fees that streaming services should be paying artists, those arguments are moot if there's no revenue pie to split up.
For Spotify, securing Swift's music on both its free ad-supported platform as well as its subscription on-demand service promises to boost sales. That's especially important given that Spotify has yet to become profitable despite having more than 50 million subscribers worldwide.
Swift's music has been available on Apple's on-demand service which top executive Eddy Cue said earlier this week recently surpassed 27 million subscribers. Also standing to gain is Pandora Media (P) , which announced a $480 million investment from SiriusXM (SIRI - Get Report) on June 9 after having launched its on-demand music service in April.
Spotify is on target to become operating cash flow positive for full-year 2018, according to Santosh Rao, research director at investment firm Manhattan Venture Partners.
Investors are eager for the music streaming company to hold an initial public offering, or even direct listing, which would allow existing stakeholders a platform to trade their stock. Spotify has raised more than $1.5 billion in private equity and venture capital since launching in Sweden 2007.
That the rapprochement between Spotify and Swift became public on the same day that her alleged archenemy Katy Perry released her new album Witness is a subject best left for tabloids and Twitter. (Apparently, they don't like each other.)
Spotify quietly celebrated the Swift signing in a June 9 statement: "We can confirm that Taylor Swift's entire back catalogue is now available on Spotify for her millions of fans to enjoy."