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American indie labels group A2IM questions Apple Music deal

By | Published on Monday 15 June 2015

Apple Music

A week on from the unveiling of the all-new Apple Music – set to go live on 30 Jun – chatter remains about the new service’s licensing deals with the music rights owners.

As previously reported, it was known that a big sticking point between Apple and the majors, as they wrangled over their Apple Music deals, was the tech giant’s proposal it pay no royalties at all while users access its new streaming service for free during a three month try-before-you-buy trial period. It’s not clear what resolution Apple reached with the majors on that point, but the freebie period seemingly remains in the deal still on the table for the independent record companies.

Indies have questioned why they should subsidise the mega-rich Apple’s three month free trial initiative, while also worrying that, if during those three months freebie users on Apple Music stop downloading tracks or cancel a Spotify subscription, that could have a negative impact on what, for many indies, are the two most important revenue streams in 2015. This could be particularly damaging for labels with big new releases due out while all new Apple Music users will be on the free trial.

Apple’s negotiations with the indies are somewhat different to those involving other streaming services, in that the firm does not deal with Merlin, the agency that usually represents a significant number of independent labels and distributors in the digital domain. This is simply because the original iTunes deals pre-date the launch of Merlin, and each time Apple upgrades its music platform it simply revises existing arrangements.

Though if enough indies refused to sign up to the Apple Music deal as it currently stands, and negotiations seemed to be at a deadlock, it would be interesting to see if the labels would or could look to Merlin to step in as a negotiator. Given a lump sum payment from Apple might be the solution for this kind of stand off, a sector-wide deal would make sense.

However, not all indies are as yet despairing on this. Because, while Apple was notoriously unfriendly to the independents in the very early days of iTunes – a turn of events that in part motivated the creation of Merlin – most indie labels now enjoy good relations with the tech giant. And few are yet comparing this deal wrangling with last summer’s stand off with Google over the YouTube streaming service. But there is still some definite negativity out there.

Meanwhile, the American Association Of Independent Music has posted its thoughts on Apple Music’s freebie request, following the leaking of an indie label contract from the new service by Digital Music News last week.

The trade group writes: “Since a sizable percentage of Apple’s most voracious music consumers are likely to initiate their free trails at launch, we are struggling to understand why rights holders would authorise their content on the service before 1 Oct. This is especially true in light of the potential revenue damage to a music label’s iTunes download revenues and impact on their cash flow”.

It adds: “A2IM understands that each music label must determine for themselves their own promotional and commerce plans and that we respect our member labels’ independent entrepreneurial spirit. We simply suggest to our members that before agreeing to any direct licenses, that they should please consider all factors and their effects on their music label’s results, now and in the future, and make an educated decision”.

Apple might argue that while it is looking for the rights owners to take a hit on the free trial, unlike the streaming music start-ups, it is planning a mega-bucks above-the-line advertising campaign that will bring in a whole new community of online music subscribers, so that long term everyone will benefit, especially as Apple Music will not have a full freemium level paying much smaller royalties than premium.

Though it remains to be seen whether Apple really can hook in more mainstream consumers at a £10 a month price point, while smaller indies may also have shorter term cash flow concerns with this deal even if they buy all the Apple Music hype.