Apple Is Now Sending Non-Negotiable iTunes Radio Contracts to Indie Labels…

That’s according to several indie label sources, all of whom have agreed to share top-level contract details with Digital Music News.  These are bigger labels you’ve definitely heard of, along with a number of smaller labels and indie distributors.

All of them are essentially confirming this: Apple is now sending pre-filled, inferior contract terms to independent labels for iTunes Radio inclusion.

“[Apple] will not make much in the agreement negotiable, if anything,” one label source shared.

Another noted that indies are being handed “significantly less favorable terms than what the majors are reportedly receiving,” with little wiggle-room for negotiation.  “The deal terms are basically what they are, that’s the way Apple’s been doing it from the beginning,” another source noted.

“I think it’s really just the majors [getting their deals] and then everyone else.”

The terms have been judged “substantially inferior” to deals forged with major labels Sony Music Entertainment, Warner Music Group, and Universal Music Group.  Starting months ago, that trio negotiated healthy advances in addition to per-stream and ad-sharing revenues, according to multiple sources familiar with those discussions.

Indies, on the other hand, will not be receiving advances, at least according to the sources sharing information.  But one source noted that the pre-determined contracts do contain per-stream and ad-sharing components.  Both are lower than the rates secured by the majors.

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In the major label agreements, several reports note that revenue-sharing will begin after ad-based revenues on iTunes Radio reach a certain threshold.  Advances, of course, happen prior to launch and are immediately bankrolled by the beneficiaries.

The ‘sign here’ situation raises some questions about the absence of Merlin in these negotiations.  The indie consortium, often an important rabble-rouser for the little guy, doesn’t appear to be conducting any negotiations with Apple.  Indeed, Merlin head Charles Caldas has said nothing to the media about Apple’s iTunes Radio rollout, and flatly declined to speak with Digital Music News on the matter.

Other questions also remain unanswered, including the sway of larger indies.  That includes groups like Big Machine Label Group, Glassnote Records, and XL Recordings, all of whom are technically indies but carry extremely important catalogs spanning the likes of Taylor Swift, Mumford & Sons, and Adele.   A pre-filled, ‘sign here’ form could be flatly insulting to these organizations, and separate negotiation rounds could be happening with the largest indies.

So let’s talk some numbers, shall we?  The deal was deemed ‘complex’ by one source who agreed to discuss specifics, with ‘greater than the sum of’ types of clauses sprinkled throughout.  But the basic payout for indies seems to be $.0013 per ‘royalty-bearing stream,’ with marginally higher rates for premium, iMatch subscriber streams.  That rate increases to $.0014 in year two.

 

Image: Arturo R@flickr; licensed under Creative Commons by SA 2.0).

32 Responses

  1. Shane NRG

    Thats not a nice way of doing business. Kind of a dick move considering Apple are the new kids on the block in music streaming services.

    Reply
  2. JTV Digital

    Apple rules the digital music industry, that’s a fact.They are now in a position to impose their rules to anyone.Even major record labels defer to Apple.

    Reply
  3. Visitor

    “.0013 pennies per royalty-bearing stream”

    You do mean $.0013, right?

    Reply
  4. Casey

    That is slightly more than Pandora pays for their free users. They pay a higher rate for their paid users. Although this has “interactive” features, which Pandora does not.

    Reply
    • Champion

      Spotify pays almost four times as much per stream on average. But yet Apple is seen as a God around here.

      Reply
      • Henry Chatfield

        Comparing Spotify and Apple’s service is like comparing a bike to a car; there have many differnces. One is an interactive service and one is a non-intereactive service, therefore different payout pricing brackets.

        Reply
      • JTV Digital

        Apple’s iTunes accounts for 60/70% of digital music sales worldwide (and 100% in certain territories), so yes they can offer any ‘micro-peanuts’ $ per stream, at the end it will always represent more revenue than any other streaming service out there.

        Reply
        • Visitor

          Maybe if iTunes Radio was an on demand service.

          More revenue? I strongly doubt it. Check your iTunes Match revenues.

          Reply
          • JTV Digital

            “Pick any artist, song, or genre, and iTunes Radio instantly builds a station around it.”

            It’s almost on-demand since it’s based on a recommendation engine.

            JTV Digital | affordable digital music distribution

  5. Visitor

    “Spotify pays almost four times as much per stream on average. But yet Apple is seen as a God around here.”

    Spotify is on demand. iTunes Radio is not — and it is the portal to the world’s biggest record store.

    Plus, Apple has supported artists from the start and created a complete ecosystem for us.

    Get the picture?

    Reply
  6. Get the picture

    No, the picture is Apple has always sent indies, be them labels or the aggregators, take it or leave it deals. Little or no room for any negotiation on the store deal or international expansion, finish my collection, any amendment. nothing.

    And Apple being there to support the artists? Are you fucking stoned? Apple has never shared a penny to the labels on device sales, Microsoft has. Apple has made billions on devices using artists’ music on the cheap, and idiots in this forum and know-it-all indie labels complain about Spotify, Rdio and Rhaposody pennies, while getting a cut of Apple’s device sales would dwarf streaming revenue.

    Reply
    • Visitor

      “And Apple being there to support the artists?”

      Yes, the music industry would be dead today without iTunes.

      Then there’s the rest of the ecosystem. Don’t get me started… 🙂

      Reply
    • steveh

      “idiots in this forum and know-it-all indie labels complain about Spotify, Rdio and Rhaposody pennies, while getting a cut of Apple’s device sales would dwarf streaming revenue.”

      The idiot is you, asshole, because you fail to recognise that iTunes music sales income dwarfs streaming revenue.

      Your concept is ridiculous. Did we expect Sony/Phillips (who developed the CD) to give us a cut of CD player sales. No.

      We sold our CDs and yes they were played on the CD players. But if there were no CD players to play them on we would not have been able to sell CDs – geddit?

      For all its faults Apple and iTunes built an ecosystem that generates pretty good revenue.

      Spotify and the others do not.

      And if you really seriously analyse the numbers there is no way that Spotify etc can generate serious income for music creators without destroying the iTunes ecosystem. Is this what we want?

      Reply
      • steven

        Asshole? Someone needs to get laid. And learn how to spell before you talk to the big boys/girls.

        Read about the Audio Home Recording Act and get back to me chief.

        As I said, Microsoft gave money from Zune sales to the labels, Apple could have easily done that since they set prices for songs and albums on iTunes.

        Why, because they didn’t have to and they made a crappy ecosystem that nobody loves (Ping anyone?) but dominated due to an amazing suite of portable products and tablets.

        Reply
        • Yves Villeneuve

          Real artists are not in the business of selling Cd or MP3 players. We can’t control these products and its sales while indies would not be paid from this grubby scheme meant to solely enrich the major labels. SteveH makes a very good point. I am only interested in earning a living through music.

          Reply
        • steveh

          “As I said, Microsoft gave money from Zune sales to the labels, Apple could have easily done that since they set prices for songs and albums on iTunes.”

          I take you are not on the music creator side of things ie. you don’t get monthly or tri-monthly income statements detailing the digital income of your record releases.

          Because it takes a special amount of extreme idiocy and ignorance to equate Apple iTunes (the outstanding colossal success story of digital music distribution) to Zune (an absolutely ignominous failure).

          Reply
          • I take it

            Read carefully and look at the words in CAPS so you understand. I know it is hard.

            The point is, ZUNE (a device) by MICROSOFT (a company) gave a CUT of the DEVICE SALES to the LABELS (where I’ve worked) and DISTRIBUTORS and AGGREGATORS (where I’ve also worked, major and indie) as opposed to APPLE (a company) did not provide a cut to the labels and distribitors and aggregators on the IPODS AND IPHONES (also devices)

            It takes a head as thick as yours to not understand that despite marketshare or success of one device (ipod/iphone) over another (zune), one company provided an EXTRA royalty or revenue stream to the labels (Microsoft) and one didn’t (Apple)

            I happen to manage a team of people that write XML and ingest DDEX reporting, so I know a little something about managing over a million dollars of annual digital revenue. I’m quite pleased with the streaming services and have never felt Apple cared much about music or labels. some nice people work/have worked there, like Bruno Ybarra, Chandani Patel, Alex Luke, Brian Larson, Jackie Kralj from Australia, but Apple could not give a fuck about my business doing well or bad. It’s my own problem.

            If Apple gave the record companies a nickel for every device they’ve sold in history, we’re talking $30M. Is that too much to ask for from a company that made 11.6 Billion dollars after COGS, depreciation and taxes on $35B in earnings?

          • steveh

            “The point is, ZUNE (a device) by MICROSOFT (a company) gave a CUT of the DEVICE SALES to the LABELS (where I’ve worked)”

            You seem to willfully ignore the wildly disproportionate income revenues that iTunes has provided to labels compared with Zune.

            Why do you ignore this?

            Is it just blind ignorance or do you have some kind of wacky agenda?

  7. Dave

    Since Glassnote and Big Machine are distributed by majors I would assume those majors are receiving the more favorable terms for those labels and then paying the labesl per their agreements. For Adele, doesn’t Sony own the US rights? So again why would any of those labels have anything to say about this since they are basicially part of the deals already cut by the majors.

    Reply
  8. hippydog

    I’m now constantly amazed at how many artists have drunk the Apple kool-aid…

    They didnt “save” the industry.. they were just smart enough to see a profit in the shambles as it was being destroyed..

    I just did a quick google search and wasnt able to find the exact current rates..

    found this

    http://www.macrumors.com/2013/03/07/apple-reportedly-offering-half-of-pandoras-royalty-rate-for-streaming-music-service/

    does that mean IRadio is basically on par with Pandora?

    Reply
    • Yves Villeneuve

      You never go into negotiations with your “last offer”. Difficult to imagine Apple was expecting half of Pandora’s rate as the final result of this dealmaking endeavor.

      Apple is not asking lawmakers to set lower rates for content owners. They respect the market process, unlike Pandora with their break-even or loss-making business model in search of subsidies.

      Reply
      • hippydog

        maybe try actually READING the posted article before randomly replying to peoples posts..

        Even better. dont reply to my comments at all and start your own post..

        Reply
        • Yves Villeneuve

          Honestly, I read the article when it was first published. Why would Apple immediately give the labels what they wanted? Apple was expecting to launch no later than the end of the year as per the article. Plenty of time to reach a COMPROMISE with the labels. Unfortunately for Apple, it did not receive a compromise deal.

          You will note that Apple did not hold out until the last quarter for its apparent “final offer” as it wanted the labels to believe, if lucky but was worth a try, through the statements in an article made through an Apple products website (your link). In short, the article was an Apple ruse.

          You are obviously anti-Apple for whatever reasons.

          Reply
    • Visitor

      Apple is the only company I know of that can fuck you over and you’ll see people yelling, “please Apple, fuck us over more!”.

      Reply
  9. Johnny Gagnon

    My personal reply would be a re enactment of a credit card commercial everyone has seen on tv,after climbing up a tree within the zoo’s monkey compound to hand the credit card a visitor had dropped, I would simply add : no thank!

    Reply

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