Apple is reportedly in an ongoing discussion for revising its deals with music labels. The company is said to be looking to bag a discount on the streaming revenue cut charged by labels, now that Apple Music and iTunes both bring enough traction for music companies. Apple is reportedly looking to cut the profit revenue percentage of record labels from streaming, as their deals now expire by the end of June, and new deals need to be signed.
Bloomberg reports that Apple looks to bring its rate down to what competitor Spotify pays to its labels. In the initial days of Apple Music, the company reportedly overpaid record labels to get them on board. The music industry was vary that Apple Music would cannibalise their iTunes business – which was a major source of revenue. However, now that Apple Music has been live for two years, and hasn’t been as harmful to iTunes as expected, record labels are now warming up to the idea, albeit with reservations, the report adds.
The report also claims that record labels are still asking Apple to push iTunes in countries where streaming isn’t such a big deal. In countries like Japan and Germany, music is still bought and heard, rather than streamed. In developing and emerging countries, people still prefer to download than stream music.
In the current deal, Apple gave 58 percent of revenue generated from Apple Music subscribers to record labels, while Spotify has now reduced that margin to just 52 percent. Citing people familiar with the matter, the report states, “The labels are open to a reduction in Apple’s rate -- provided it’s also able to expand subscriber rolls and meet other requirements.”
Spotify was able to bargain as it promised a growth in subscribers, and Apple may be using similar tactics to get music labels on board with the negotiations, the report adds.