Awkward Question: Are Indies Getting Shafted by iTunes Radio?

Updated, 11:30 am PCT (June 13th): we’ve received confirmation from several large indies that Apple has already sent standardized contracts with pre-set terms to independent labels.  We’re not sure what the terms of those pre-filled contracts are, however one source noted that they are less favorable than the major agreements.  Another stated they are ‘substantially lower’ than what majors are getting.  The original article, published Wednesday, follows.

You know the drill right when it comes to indie label licensing, right?

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Well, it goes something like this: a major music service does a bunch of major label deals leading up to launch, and saves the independent labels for last (who often get an inferior deal).  An indie label consortium named Merlin then conjures up some outrage, clamors for parity, and everyone works something out.

But is that about to happen with iTunes Radio?  So far, the sealed deals we know of only include the major labels (Sony Music Entertainment, Warner Music Group, Universal Music Group), plus mega-publisher Sony/ATV.  And depending on which report and/or source you read, majors like Warner have received advances and eventual  shares of advertising, on top of agreed-upon per-stream rates.

So why hasn’t anything been mentioned on the indie front?  One source noted that Merlin isn’t even at the negotiation table with Apple on this one, and Merlin head Charles Caldas has declined to offer any comment to Digital Music News.  Which seems strange, since Caldas is usually the one making the most noise in these situations.

A2IM president Rich Bengloff, who might defer to Caldas in situations like these, has not responded.

One industry attorney told Digital Music News that Apple is unlikely to negotiate with thousands of indie deals, but could cherry-pick some of the larger indies with the most important catalogs (ie, Big Machine, Fearless, Glassnote, etc.)  Those indie labels may get a seat at the direct-licensing negotiation table.


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The other labels may simply get a form in the mail, with a note that says, ‘sign here’.  “With iTunes Radio, Apple is going to come to us and say ‘sign this deal‘,” Dualtone cofounder Scott Robinson recently told an audience at New Music Seminar.  “But with Sony and Warner there was a negotiation process.”

Another possibility is that indies (and anyone non-major, for that matter) are already inking deals, ‘independently’ or otherwise (no pun intended).

What else? Structuring non-major deals though existing, non-interactive rates is also certainly possible, though that would seriously complicate Apple’s attempts to avoid all of those usage restrictions and hassles.

More as we learn more.

Photo credit: Denise Mattox (Creative Commons by ND 2.0)  

8 Responses

  1. what about the artist?

    By doing direct deals, Apple skips having to pay SoundExchange like Pandora does. SoundExchange pays 50% of what it collects (after some deductions) directly to registered artists. Is Apple going to send any money directly to the artist? Or is Apple going to force the label to send 50% to the artist? Or is Apple going to just screw the artist like everybody else does?

    I hate to say it, but it seems like listening on Pandora is a lot more financially beneficial to artists than this iTunes Radio is going to be.

    • JTV Digital

      Hi,No Apple is not going to deal directly with artists.They also don’t sign any new deals with content owners / distributors when it comes to music.There are already too many out there.

  2. earbits

    Gee, I don’t know who could have seen this coming, except everybody. I wrote an article about this on Hypebot and got chastised for it. I said, if radio stations do not want to use compulsory licenses and instead go direct, they will play mostly major label content and indies will get paid less, too. It’s a cost burden to go out and secure hundreds or thousands of small licenses, and if companies do not need to do this to please 90% of listeners who are there for major label material anyway, they’re just not going to make the effort. This is the precise reason why compulsory licenses that a company can actually build a business on are important. The minute you sit these companies down in the offices of the major labels, independent artists lose.

    I’m telling you, the solution to this is compuslory licenses that let you build a service consumers want, with a royalty rate based on a percentage of revenue and more reasonable minimums. All of these behind-closed-doors licensing deals between iHeart, iRadio, etc, are never ever going to be a good deal for independent artists.

    • Henry Chatfield

      Assuming these behind-doors agreements are going to keep happening with the majors, what do you think is the best plan of attack for indies?

  3. earbits

    Paul, this article begins to reveal the flaw in your constant critique of those who have been campaigning for lower statutory license rates. Due to the level of the cost connected with using the statutory scheme, there is a market incentive to go through the effort of direct licenses.

    Direct licenses will always favor those with the most negotiating leverage. Those parties are the big players: the majors on the content side, and established giants on the distro side, i.e., Apple, Spotify, Amazon.

    The indies are a side note, unfortunately. This is due to the statutory licensing scheme that you consistently defend in your incessant attacks on Pandora’s lobbying for lower rates. The emerging landscape of the internet music marketplace will look a lot like the landscape that existed prior to the internet: dominance by huge corporations with cozy relationships. Well done Paul.

  4. Paul Resnikoff

    Quick update: we’ve gotten confirmation from at least one large indie that Apple has already sent standardized contracts with pre-set terms to independent labels. We’re not sure what the terms of those pre-filled contracts are, however one source noted that they are less favorable than the major agreements.

    More as we get it.

  5. Jeff Robinson

    Question: Jow would one audit Apple for spin counts?

    Answer: It will be impossible. Likely it’ll morph into a ‘marketing’ thing where majors will pay for airplay and Apple will win.

    Keep going on this issue Paul. It has to be sorted out.

    Oh yeah, a quick last thought “THE INTERNET IS A SEWER”