iCloud record label deals may cost Apple $150 million

Posted:
in Mac Software edited January 2014
In order to get the major record labels onboard with its forthcoming iCloud service, Apple could fork over as much as $150 million in "advanced payments."



The cost of securing deals with the labels is more than $100 million, and as high as $150 million, three separate sources reportedly told The New York Post. Apple is said to have agreed to pay the four major record labels between $25 million and $50 million each.



The money was described as "an incentive to get on board, depending on how many tracks consumers are storing." The report also reaffirmed earlier claims that iCloud will initially be free to people who bought their music from iTunes, but that the company is "considering" a $25-per-year charge in the future.



"The music companies will divide the fee with Apple, with the tech firm taking a 30 percent cut, 12 percent going to music publishers, and the rest to the labels to divide with their artists," the report said.



The final piece of Apple's music streaming puzzle fell in place on Thursday, when it was revealed that Apple had reached a licensing deal with Universal Music Group for iCloud. Universal was the last of the four major record labels to get on board with Apple's service.



Apple revealed earlier this week that it will unveil the iCloud service on Monday during the kick-off keynote for its annual Worldwide Developers Conference. Chief Executive Steve Jobs will unveil iCloud, along with iOS 5 and a presentation of Mac OS X Lion.







AppleInsider exclusively reported on Wednesday that while the music streaming portion of iCloud is expected to carry a fee, other components of the service, including syncing of bookmarks, contacts, and calendar events, are expected to be free to users of Mac OS X Lion. Apple may also sell Lion with a low price point to encourage Mac users to upgrade to the latest operating system.



With WWDC set to kick off on Monday, Apple is hard at work preparing the Moscone Center in San Francisco, Calif., for the event. On Thursday, the company began to erect banners at the center that show a new iOS-style icon for the upcoming iCloud service.
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Comments

  • Reply 1 of 40
    wurm5150wurm5150 Posts: 763member
    $150M? That's nothing. Apple makes that much in a couple minutes. They already made $150M after I finished typing this comment.
  • Reply 2 of 40
    ijoeijoe Posts: 18member
    150 million is nothing considering the potential
  • Reply 3 of 40
    davemcm76davemcm76 Posts: 265member
    $150 million? for a company with $60billion+ sat in the bank I'd bet Steve probably loses that amount down the back of the sofa on an almost daily basis!
  • Reply 4 of 40
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by Wurm5150 View Post


    $150M? That's nothing. Apple makes that much in a couple minutes. They already made $150M after I finished typing this comment.



    Quote:
    Originally Posted by ijoe View Post


    150 million is nothing considering the potential



    This might help put it in perspective. Between September 9, 2009 and February 24, 2010 Apple announced milestones of 8.6 billion and 10 billion for music sales, respectively. That's 1.4 billion songs in 168 days, or 8.3 million per day. If Apples only holds onto 30% the labels get $5,775,000 per day, or $173,250,000 per month, or over a half-billion per quarter.



    (I see others are focusing on how little of a drop in the bucket this is to Apple, whilst my calculations are how it's substantial to the labels.)



    Edit: Oops, I did my calsulations based on 99¢ pet song, not the now standard $1.29. At that price it's $7,494,900 per day for 70% or 20 days to recoup $150,000,000, assuming they get 70%.
  • Reply 5 of 40
    Quote:
    Originally Posted by Wurm5150 View Post


    $150M? That's nothing. Apple makes that much in a couple minutes. They already made $150M after I finished typing this comment.



    According to my calculations, it does take them 54 hours to generate $150 million in profit
  • Reply 6 of 40
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by Groovy123 View Post


    According to my calculations, it does take them 54 hours to generate $150 million in profit



    Your calculations are correct for Q2-2011, but you didn't show your work so I can't give you full credit on this assignment.
  • Reply 7 of 40
    sevenfeetsevenfeet Posts: 390member
    Ironically the same amount of money that Microsoft fronted Apple in early '97. At that point, it was (and still is) chump change to Microsoft but for a company in a death spiral with less than $4 billion socked away, that kind of money was significant working capital for Apple.



    My how times have changed.
  • Reply 8 of 40
    Quote:
    Originally Posted by solipsism View Post


    Your calculations are correct for Q2-2011, but you didn't show your work so I can't give you full credit on this assignment.



    No work needs to be shown, these calculations that are given upon you shall be praised and treated as the only and indisputable truth
  • Reply 9 of 40
    MacProMacPro Posts: 17,835member
    Quote:
    Originally Posted by Wurm5150 View Post


    $150M? That's nothing. Apple makes that much in a couple minutes. They already made $150M after I finished typing this comment.



    My thoughts exactly

    But Soli proved us wrong!
  • Reply 10 of 40
    MacProMacPro Posts: 17,835member
    Quote:
    Originally Posted by Sevenfeet View Post


    Ironically the same amount of money that Microsoft fronted Apple in early '97. At that point, it was (and still is) chump change to Microsoft but for a company in a death spiral with less than $4 billion socked away, that kind of money was significant working capital for Apple.



    My how times have changed.



    Just for those that believe the urban legend side of this...



    http://www.zdnet.com/blog/apple/stop...ved-apple/7036
  • Reply 11 of 40
    shenshen Posts: 434member
    Clearly Apple thinks this is important, but I still don't get it. Apple often releases products that don't fit me or my life, but I still see how they are useful to others. This I just don't get. And people here have talked about it as a great idea in the past, so I am hoping someone can help me out...



    If they start charging the rumored cash for this, even if it is a small amount, what exactly am I getting for it? The ability to stream my own music to myself? I already have my music. Where and when will I use this? In the car where I don't have an Internet connection to stream it? Oh wait I have my phone to stream it! My iPhone! Which already has my music on it....



    Is this service aimed only at people with more music than they have space on their iPods? How many people will this really be a good deal for?



    Generally, the more I think about Apples upcoming stuff, the more brilliant and useful it seems, even if it is aimed at others more than myself insee a compelling case to be made. But unless there is a whole lot more to this, I am not impressed so far. Anyone help make a case to me for why this is a great thing?
  • Reply 12 of 40
    magicjmagicj Posts: 406member
    Quote:
    Originally Posted by shen View Post


    Anyone help make a case to me for why this is a great thing?



    I'm in the same boat you are. This looks to me to be nothing more than determination to have a cloud product despite 6 or so years of yawns from consumers regarding their previous cloud products.



    Meanwhile, the B&N nook is selling 150% more books than Apple's iPad, iPhone, and iPod Touch combined, despite selling far fewer devices. There's clearly a need to improve in this area on Apple's part. Yet... nothing.
  • Reply 13 of 40
    porchlandporchland Posts: 478member
    Quote:
    Originally Posted by Wurm5150 View Post


    $150M? That's nothing. Apple makes that much in a couple minutes. They already made $150M after I finished typing this comment.



    Seriously. For an annual fee of $25, Apple would generate $150M a year for every 6M users who sign up for the service. That would be an extremely low adoption rate even of high-volume iTunes content buyers.



    Quote:
    Originally Posted by shen View Post


    If they start charging the rumored cash for this, even if it is a small amount, what exactly am I getting for it? The ability to stream my own music to myself? I already have my music. Where and when will I use this? In the car where I don't have an Internet connection to stream it? Oh wait I have my phone to stream it! My iPhone! Which already has my music on it....



    I'm still not convinced that the ability to stream your iTunes purchases is worth $25 a year if most of the other cloud features are free, so I think Apple will have a few surprises that come with that $25.



    The big sell to me would be never having to sync my iPhone or iPad back to iTunes on my Mac, but that strikes me more as an evolutionary progression of iOS than something Apple would expect me to pay extra to be able to do.
  • Reply 14 of 40
    porchlandporchland Posts: 478member
    Quote:
    Originally Posted by magicj View Post


    Meanwhile, the B&N nook is selling 150% more books than Apple's iPad, iPhone, and iPod Touch combined, despite selling far fewer devices. There's clearly a need to improve in this area on Apple's part. Yet... nothing.



    That's probably true of Kindle too, but isn't that because Nook and Kindle are pure-play devices, i.e., people are getting them specifically to buy a lot of ebooks?
  • Reply 15 of 40
    technotechno Posts: 678member
    Sounds like the artists are at the bottom of the totem pole once again.
  • Reply 16 of 40
    rot'napplerot'napple Posts: 1,839member
    "iCloud record label deals may cost Apple $150 million"



    They're gonna want it back...

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  • Reply 17 of 40
    blastdoorblastdoor Posts: 1,888member
    People who think that $150 million is nothing probably will never have even $1 million. Apple is one of the most penny pinching companies out there, which is part of why they have so many pennies.



    $150 million is probably an overpayment, UNLESS it's part of a larger strategy that isn't quite visible yet, which I'm guessing it is.



    My guess as to what that strategy is --- sell a "cheap" iPhone with very low capacity at a very low subsidized price, but then make money off of a monthly iCloud subscription fee. That iCloud subscription would be necessary for the phone to work at all, and it's where all of a person's files would be kept, including music. If a strategy like this were to allow Apple to dramatically increase the number of iPhones that get sold while maintaining high profit margins, then $150 million would be well worth the price.



    On the other hand, if this is just a way for existing customers to move some of their music to the cloud then I think it's a waste of money. Streaming music I already own over an expensive, bandwidth-limited 3g connection and paying an extra $25 a year for the privilege seems totally retarded to me. Anyone who is jazzed about that can't do math.
  • Reply 18 of 40
    shenshen Posts: 434member
    First, the ebook thing:

    I wouldn't complain if Apple sold more ebooks, but I doubt they care. They are winning that battle too, as both the kindle and the nook have readers on the iPad. I know at least 4 people who bought iPads to replace early generation readers knowing they can use them the same way. I suspect Apple is ok with selling their entire ecosystem in the form of an iPad at the cost of sharing some small chunk of the money spent on content.



    The music streaming:

    I am trying to be careful not to bring the other MobileMe stuff into this, and maybe that is a mistake. Maybe this is just one more small service to make MobileMe worth it to others. Myself, I use it already. They don't need to add this, though I hope a lot more is coming, including a price change.



    But the fact remains, I don't see any value from this one little part of the service at all. Either I am missing something, or Apple, who normally do a great job of figuring what people want before the people themselves, just paid 150 million to be able to offer something of no value. I am betting they are right and I am wrong, but I still want to know how.



    Edit: wow that there was a bunch-o-typos.



    Also, blastdoor, that is a pretty good case. That might be what I have been missing. If AT&T adds a family data plan that change would make my kids happy, as they would both be getting one of those described phones at launch from dear old dad...
  • Reply 19 of 40
    magicjmagicj Posts: 406member
    Quote:
    Originally Posted by Porchland View Post


    That's probably true of Kindle too, but isn't that because Nook and Kindle are pure-play devices, i.e., people are getting them specifically to buy a lot of ebooks?



    Well, I have both iBooks Store and nook bookstore on my iPad. I buy more books from nook because it's much easier to find things and much more enjoyable just browsing around looking for something to catch my eye.



    As a specific example: I can browse magazines in the "Magazine" section of the nook store. The "Magazine" section is further divided into sub-categories. Each of these sub-categories is further divided again into additional sub-categories. This means I can find what I'm interested in in only a few seconds on the nook store.



    By contrast, iBook Store doesn't even have a "Magazine" category. I have to wade through their 250,000 books to find magazines.



    Also, why is it that I can run the nook bookstore on the Mac, but I can't run Apple's iBook Store on the Mac?
  • Reply 20 of 40
    magicjmagicj Posts: 406member
    Quote:
    Originally Posted by shen View Post


    I wouldn't complain if Apple sold more ebooks, but I doubt they care.



    Makes no sense. Nook is demonstrating there's a market much larger than what Apple is currently reaching. Why not go after it?



    Conversely, why spend time and money on the cloud stuff when Apple's previous efforts at cloud services have been demonstrated failures, as have everyone else's attempts at cloud music services.
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