Today proved an absolute winner for producer Universal Music Group (UMGNF) as it struck a deal with Spotify (SPOT) for direct licensing of content. Yet this was not the only issue facing Universal, as it also made a move to get out from under a potential lawsuit from one of its musicians. This multi-year deal was sufficient to send Universal surging nearly 8% in Monday afternoon’s trading.
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While the move to make a new agreement with Spotify is being hailed as a huge advance for content providers, content providers do not seem so sure. Back in November, musician Drake filed two separate actions against Universal Music Group. The report accused Universal of “conspiring with the music streamer Spotify.”
Drake reportedly withdrew one action, which he filed in New York. The second action he filed in Texas, and that one still stands. But Universal has filed a motion to dismiss that one, calling it a violation of “protected free speech” efforts. With the motion, Universal is now calling on Drake to offer up “…clear evidence of the claims he is petitioning,” including a “pay-to-pay scheme,” the report notes.
A New Licensing Deal
As for the licensing deal, it calls for Spotify to license Universal Music’s content throughout the Spotify product portfolio. That will not limit the content to hit Spotify in the United States, as Spotify has a worldwide presence that will open up for Universal’s content as well. This is a measure that should offer Universal some protection against copyright issues as well, a common problem for music platforms.
There were no details provided on the contract, but thanks to Spotify’s multi-tier system and bundling options, it should provide significant benefit to the artists who provide content for the platform. It also represents another stage of collaborative effort between Universal and Spotify, cementing Spotify’s place in the music streaming ecosystem.
Is Universal Music Group Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on UMGNF stock based on three Buys and four Holds assigned in the past three months, as indicated by the graphic below. After a 10.09% loss in its share price over the past year, the average UMGNF price target of $28.28 per share implies 3.88% upside potential.
