Apple hunting after lower royalties for Apple Music & iTunes content
Apple is reportedly in negotiations to reduce the royalties it pays for content on Apple Music and the iTunes Store -- specifically, trying to bring amounts closer to what rival Spotify pays.
Apple's current deals with record labels expire at the end of June, Bloomberg sources said on Wednesday. The people noted, however, that rather than being a hard cutoff, associated parties will likely extend the deadline until an agreement is reached.
To date, labels have allegedly been taking a 58 percent cut from Apple Music subscriptions, a figure higher than most major services. Spotify, though, recently managed to lower its equivalent rate from 55 to 52 percent, with the tradeoff that it has to hit specific targets for subscriber growth. Apple is pursuing the same kind of deal, the sources said.
The labels have meanwhile asked Apple to commit to promoting iTunes in markets where streaming is less prevalent, such as Germany and Japan. In the U.S., music download sales have fallen in the past few years to 24 percent -- likely owing to faster internet connections, and the potential savings of streaming. While a Spotify or Apple Music subscription typically costs $9.99 per month, that money would buy just a single album on iTunes.
Apple is said to have offered high Apple Music royalties as a way of luring in labels who were worried the service would bite too deeply into iTunes. With 27 million subscribers, the company may now feel more comfortable about asking for concessions.
Initially Apple even planned to skip paying royalties from listeners' free trials, but backed off after an open letter by pop star Taylor Swift.
Apple's current deals with record labels expire at the end of June, Bloomberg sources said on Wednesday. The people noted, however, that rather than being a hard cutoff, associated parties will likely extend the deadline until an agreement is reached.
To date, labels have allegedly been taking a 58 percent cut from Apple Music subscriptions, a figure higher than most major services. Spotify, though, recently managed to lower its equivalent rate from 55 to 52 percent, with the tradeoff that it has to hit specific targets for subscriber growth. Apple is pursuing the same kind of deal, the sources said.
The labels have meanwhile asked Apple to commit to promoting iTunes in markets where streaming is less prevalent, such as Germany and Japan. In the U.S., music download sales have fallen in the past few years to 24 percent -- likely owing to faster internet connections, and the potential savings of streaming. While a Spotify or Apple Music subscription typically costs $9.99 per month, that money would buy just a single album on iTunes.
Apple is said to have offered high Apple Music royalties as a way of luring in labels who were worried the service would bite too deeply into iTunes. With 27 million subscribers, the company may now feel more comfortable about asking for concessions.
Initially Apple even planned to skip paying royalties from listeners' free trials, but backed off after an open letter by pop star Taylor Swift.
Comments
ironically, Spotify, which was attempting to negotiate an even lower price than they've been paying, announced a short time ago that they would be willing to pay the higher royalty fees Apple is paying.
so ain't that the bees knees!
royalty payments are very different, and don't bare any relation to retail price for music, traditionally. That's because the costs of producing, marketing, new artist development and distributing these products was much higher than the several cents per airplay, or on disk payments.
but streaming is even different from that, because the model is different. Payments per play are extremely low, but the assumed number of plays is supposed to make up for it. But no streaming service has ever made a profit at the $9.99 monthly price charged. Almost all have gone out of business, and Spotify and Pandora both lose a lot of money each year. It's assumed that Tidal does too, but it's privately owned, so the numbers aren't available.
If Taylor Swift is OK with the lower Spotify payments, then Apple should also lower their payments to Spotify's level.
Could be too that Tim Cook did some reading and saw the bar he set for Apple services just got higher.
Reaching the level of a Fortune 100 company now will require more than $27.5 Billion in revenue, according to the latest ranking in Fortune’s 15JUN2017 issue. Capital One Financial is ranked 100 with $27.5 B in sales in 2016. And Facebook finally cracked the top 100 list this year, reaching No.98 with $27.6 B revenue. (The reason Facebook’s market cap is a staggering $450B has to do with such things as its huge base, diversity, growth, and that it already ranks No.20 in Fortune 500 profits.)
If Apple (entire company ranked No.3 with 216 B in sales) can pull it off this fast in services, that will be no small feat. Let's hope Apple can do it by keeping artists as happy as their fans.
I believe Apple thought they could raise the bar by paying higher royalties and the recording companies would eventually force the higher rates onto other streaming services like Spotify. These higher rates would eventually eliminate the competitiveness based on price the other companies were engaging in; they would either raise their prices to offset the higher royalties or they would suffer great losses and go out of business. Very much like they tried to do with eBooks, although they apparently didn't try the illegal collusion this time around.
That didn't work this time either and now Apple is faced with a dilemma. Either keep paying the voluntarily higher royalties which fits in with their original argument of supporting the artists, or fight to cut artist payouts so they can maximize their profit. Guess which one they chose.
Spngwriter/lyrisists make a small portion (of proceeds) anytime their music or lyrics are used (or sometimes if another song come close to one of their works)
Sync wrights (or performance royalties) are are extremely variable, this is where you mostly hear about an artist making pennies on the (end sales) dollar. Most of this is just based on misunderstanding the nature of the business. Songs are expensive to produce (studio time, producers, backing musicians etc.) and even more expensive to promote (this can be huge $$) If you are Adelle or Taylor Swift (who are almost guaranteed to have huge sales $) you can cut a good deal with a label. If you are an unknown (or little known) you are asking the label to invest possibly $100K into production and double that (up to possibly $1M) into promotion of a product that is a -big- gamble. No they won't be willing to give you a major slice of those proceeds should it be successful. (keep in mind, on the other hand if your project crashes and burns you aren't on the hook for the losses, the label is)
what most people refuse to acknowledge is that music labels should be getting most of the pie, because they spend all the money, and take all the risks. Most artists lose money, and the label is on the hook for that. That's why certain people in the industry have gained such names for themselves, because they can recognize, better than others, which acts will be successful or not. It's very difficult.
and I'd like to mention that this is true for the publishing industry, the Tv industry and the movie industry.