The deal would bring dollars from any sale of Spotify shares to more artists' pockets.
Global superstar Taylor Swift has scored a win for all Universal Music Group artists with her new record deal.
In the deal, announced Monday, Swift insisted on an unusual must-have clause: If UMG sells its shares in Spotify -- the world's biggest subscription streaming music service by members -- it can't withhold any of that money from its other artists who still owe the label money. (This clause doesn't have any effect on how much Spotify pays UMG or its artists in royalties for the music streamed there.)
Streaming music has become the default way that people listen to tunes, and that shift has resurrected the financial fortunes of the recording industry. But critics say those changing fortunes haven't consistently extended to the actual artists themselves. Swift has been a consistent skeptic of streaming when its practices seem to undercut those artists. The new deal means that any windfall UMG banks by selling the shares it holds in Spotify will also benefit all the artists UMG has signed.
Swift, in an Instagram post, said that ensuring this clause was in place was literally a deal breaker.
"There was one condition that meant more to me than any other deal point," she said. "As part of my deal with Universal Music Group, I asked that any sale of their Spotify shares result in a distribution of money to their artists, non-recoupable."
It's possible that UMG would have made the same decision regardless of Swift's insistence. One of the three major labels has already done it.
When artists sign to a label, typically they're paid an advance or given access to expensive resources like studio time. A label essentially holds a debt that the artist owes, and as artists make money, they pay it down. Sony Music Entertainment, another of the world's major labels, said this summer that proceeds from selling Spotify shares would be shared straight with its artists, regardless of whether they still "owe" the company money. It later sold half its Spotify stake, valued at $768 million.
The third major label, Warner Music Group, sold its full Spotify stake in August for about $500 million. Warner, however, didn't ignore the "unrecouped balances" when it distributed 25 percent of the money to artists, so a meaningful amount of that money stayed with Warner.
Universal Music Group owns a 3.5 percent stake in Spotify.
Lucian Grainge, chairman and CEO of Universal Music Group, praised the singer, saying he respected the way she used her influence to promote positive change.
"Because of her commitment to her fellow artists, not only did she want to partner with a company that understood her creative vision and had the resources and expertise to execute globally on her behalf, she also sought a partner whose approach to artists was aligned with hers," he said in a statement.
A representative for Spotify declined to comment on the deal.
For her fans and for those who've been watching her closely over the years, the clause won't come as a surprise. When it comes to making sure artists are properly compensated for their work by streaming services, Swift has priors.
In June 2015 Swift published an open letter to Apple criticizing terms of its new music service and threatening to withhold her music unless all artists were properly compensated. Within 24 hours, Apple responded to Swift agreeing to change its policy.
Swift also pulled all of her music from Spotify in 2014, arguing that the company wasn't paying artists enough for their work. It took around three years for Swift to return to the streaming service, and ever since then, she and Spotify seem to be on good terms. This year the singer released two Spotify singles, as well as a portrait video for her hit single Delicate exclusively on the platform.
"I feel so motivated by new opportunities created by the streaming world and the ever changing landscape of our industry," she said. "I also feel strongly that streaming was founded on and continues to thrive based on the magic created by artists, writers, and producers."
Another clause in her new deal stipulates that Swift will retain ownership of all her masters. Masters from her previous albums are still owned Big Machine Records, where Swift has been since she was 14 years old.
The Universal Music Group deal arrives as she wraps up an international stadium tour, with two final shows in Japan.
Representatives for Universal Music Group and Taylor Swift did not respond to request for additional comment
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