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Pandora Music Deal Isn’t Enough for Snapchat

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Jun. 18 2019, Updated 9:16 a.m. ET

Snap seeking music rights

Snap (SNAP) is in talks to license music rights from Sony Music Entertainment (SNE), Universal Music Group, and Warner Music Group, according to a report from the Wall Street Journal, citing people familiar with the deliberations. Snap is pursuing music licenses from these record labels to expand how people share songs in posts on its Snapchat app.

Last year, Snap partnered with Pandora, which is now owned by SiriusXM (SIRI), to allow Pandora subscribers to share favorite songs with their contacts on Snapchat. But Snap competitors have gone deeper with social media music sharing, putting pressure on it to catch up. For example, Facebook (FB) has licensed music rights from the three major music labels that Snap is also in talks with to allow users of its social apps to include copyrighted songs in the videos they share across those platforms. Snap is pursuing something similar to that so it can give Snapchat subscribers more room to share music-based posts on the platform.

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Making Snapchat more attractive

While Snap may not make money directly from its music rights, it hopes to make Snapchat more attractive so it at least doesn’t lose subscribers to the competition.

For ad-funded social media companies like Snap, growing the audience size is a top priority. That is because audience size is one of the major factors advertisers take into account when deciding where to spend their money. Facebook, whose audience exceeds 6.0 billion people across its platforms, generated $14.9 billion in advertising revenue in the first quarter. But Snap and Twitter (TWTR), whose audiences are less than 500 million people, only managed $320 million and $787 million in total revenue, respectively, in the first quarter. Close to $130 billion will be spent on digital advertising in the United States in 2019, according to eMarketer data.

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