Spotify believes Universal Music Group has a billion reasons to renew its song-licensing deal.
The streaming music service expects to pay Universal, the No. 1 record label in the world, $1 billion over the next two years to cover music royalties, ad revenue and subscription fees, according to Spotify projections of its growth rate and Universal’s market share, contained in an internal email, a copy of which was obtained by The Post.
The $1 billion number — equal to the global revenue generated by all companies in the fast-growing streaming sector in 2013 — underscores the extent to which Spotify and other streaming services will drive digital revenue for the world’s biggest record company.
Spotify’s payments to Universal, home to Taylor Swift, Nick Jonas and Madonna, are projected to account for 16 percent of the music giant’s recorded music revenue by March 2017 — up from 11 percent for the April 2015 to March 2016 period.
In addition, Universal, which owns a stake in Spotify, will get 39 percent of its pretax earnings from Spotify by 2017, up from 28 percent over the next 12 months, according to the email, which factored in Spotify estimates for Universal’s growth.
The Spotify email is the latest salvo in a simmering war between the two companies and their differing views on the economic viability of free music streaming.
Last November, Swift pulled all her music from Spotify, claiming the streamer didn’t properly value her work.
Meanwhile, Universal CEO Lucian Grainge and Spotify founder Daniel Ek are in the midst of heated talks aimed at hammering out a new licensing deal.
So far, Grainge has been highly vocal that the “freemium” business model, or free ad-supported streaming, should be vastly curtailed.
Universal brass were surprised at Spotify’s $1 billion claim — the real value of Spotify’s payments is much lower, sources said.
Spotify has 60 million active users — including 15 million paying subscribers — making it the largest streamer in the world.
“Ad-funded on-demand is not going to sustain the entire ecosystem of the creators as well as investors,” Grainge noted at a Code Conference.
Ek argued after Swift’s actions that Spotify does pay artists when their songs are streamed for free.
Ek fears Universal Music is working closely with former employee Jimmy Iovine, now at Apple, to put Spotify under intense pressure, sources said.
Iovine is in charge of Apple’s expected June launch of its own subscription streaming service that, like Spotify, will cost $10 a month.
Apple’s service won’t have a free tier, other than promotional teasers.
Reps for both companies declined comment.