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Spotify, major music companies at contract impasse

Spotify is a staple of music streaming nowadays, and it is one of the most popular music applications in the world. The Swedish company has done an amazing job marketing their product and making it accessible and easy to use for consumers. But there is an interesting problem surrounding Spotify right now: they are out of contract with Universal Music, Warner Music and Sony Music, the three major music companies.

On its own, this actually isn't a huge issue, as even though the contracts are over, Spotify still is on a month-to-month relationship with the three major companies. Neither party wants this relationship to end, at least presently. 

However, it sounds like Spotify and the three major music companies are far apart when it comes to renegotiating the contracts. Spotify originally enjoyed a provision that requires them to pay the major music companies 55 percent revenue share. Another now-defunct streaming service, Rdio, had to pay 60 percent. That 5 percent difference amounts to a lot for the music industry.

Now, Universal, Warner and Sony want Spotify to pay 58 percent revenue share. This is bound to be a contentious issue when contract renewal talks become serious.

This story, though not about a contract dispute lawsuit, still highlights an interesting part of business and commercial law. Namely that contract renegotiations and discussions about changing arrangements between business partners don't have to be a bad thing -- in fact, it can be a healthy thing. Finding a middle ground during contract renegotiations is part of the process.

Source: Music Business Worldwide, "Spotify is out of contract with all three major labels -- and wants to pay them less," Tim Ingham, Aug. 22, 2016

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