Earlier this week, Spotify (NYSE: SPOT) said it acquired the music licensing platform Loudr, which offers products and services that allow content creators, aggregators, and digital music services to identify, track and pay royalties to music publishers.
Given that Spotify has run into licensing issues in the past, particularly in regard to royalty payments to individual artists, the integration of Loudr will help give online music publishers due credit in a structured and channeled way. It can help avoid significant costs, such as the a $1.6 billion dollar suit from Wixen Music Publishing, which represents artists like Tom Petty, Missy Elliot, Stevie Nicks, and Neil Young, that Spotify just faced.
Spotify said the inclusion of Loudr would "foster a more open, streamlined and modern music publishing landscape. Specifically, Loudr's team will contribute to Spotify's continued efforts towards a more transparent and efficient music publishing industry for songwriters and rights holders."
Loudr is a startup that allows people and companies to "easily obtain mechanical licenses to distribute recordings as digital downloads, ringtones, CDs or vinyl records," as per the company's website. Basically, Loudr creates an assortment of products and eases processes that help everyone from video makers to other digital music services to identify who must be paid when a certain type or bit of music is used, track the actual streams of songs, and then pay the proper royalties to the right stakeholders.
This acquisition may just be the reinvigoration Spotify's newly established share price may need, as it has been dipping of late. Its share price opened at $165.90, but midday Thursday, it was trading at $148.75.
"What Loudr has built is more than just a smart and easy way for artists to obtain mechanical licenses; it's true music industry innovation," said Adam Parness, Global Head of Publishing at Spotify, in a statement. "The Loudr team perfectly complements Spotify's music publishing operation and, together, we believe we can continue to foster a more open, streamlined, and modern music publishing landscape."
While the terms of the deal are not clear, Loudr is Spotify's first acquisition of 2018 and at the rate the company has been purchasing smaller firms, it likely won't be its last. In 2017, the streamer bought five companies, up slightly from the four it acquired in 2016.
Now that Spotify is trading on the stock exchange, because it raised plenty of funds in several rounds over the past few years leading up to its IPO, the company has cash to spend on entities like startups. While the exact sum paid for Loudr was not disclosed, Spotify may consider its acquisition money well spent to help solve the royalty problem, which remains one of the biggest issues facing the on-demand streaming business at large.