Independent Music Owners Reluctant To Join Apple Inc. (AAPL)’s Apple Music despite Sweetened Royalties
Apple Inc. (NASDAQ:AAPL)’s highly touted Apple Music service is hitting some early speed-bumps as small label companies are worried about Apple’s free three months trial program. Most of the complaints have mostly so far come from abroad and Britain in particular. British independent label companies fear that Apple’s strategy would put them out of business.
As it enters streaming music service, Apple Inc. (NASDAQ:AAPL) has many wars to fight, and it must win them all. The company is trying to challenge industry leaders like Spotify, and at the same time it is looking to unlock new revenue streams.
90-days of free music
Apple has figured out that paid-only streaming music is the way to go, and it is fighting Spotify’s ad supported streaming. To sweeten its paid-only offering, Apple is offering its music service free of charge for three months. It is the free trial that has got small music owners in Britain uncomfortable.
According to Andy Heath, the chairman of industry lobby ground called UK Music, Apple’s free music strategy has dismayed many British labels. One small label company that has openly voiced its displeasure with Apple’s three months of free music is XL Recordings. Many labels aren’t publicly voicing their criticism of Apple’s strategy because discussions are ongoing.
The greatest concern for independent labels is the prospect of losing three months of revenue. For small record companies on shoestring budgets, three months without revenue would literally put them out of business.
Small labels are complaining about Apple Inc. (NASDAQ:AAPL)’s music strategy even though the company has sweetened its offer for music owners. Apple is paying more than the industry average of 70% to label companies and music publishers. In the U.S. the company is offering music owners 71.5% of revenue generated from Apple Music. Overseas, Apple is returning an average of 73% of Apple Music revenue to content owners.
According to Heath, the issue is not about what rates Apple Inc. (NASDAQ:AAPL) is paying, but the three months of free streaming is unpalatable for small labels. For that reasons, independent music owners think they are better off sticking with Spotify.
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