Yesterday, Digital Music News published a leaked Apple Music contract confirming that no royalties will be paid to rights owners during a three-month trial period. In response, highly-influential independent label organization A2IM offered this word if caution to its members.
Yesterday, Digital Music News publicly disclosed key aspects of Apple Music’s deal with Independent rights holders. While on the surface the rates appear to be competitive, per stream and per subscriber rates are only one aspect of the total compensation in a licensing deal. As we noted in our recent item on music licensing: the art of the deal, licensing compensation often takes many forms other than the streaming rate.
The Digital Music News story revealed that Independent rights holders will receive no compensation for their content during Apple Music’s 90-day free trial period.
It is surprising that Apple feels the need to give a free trial as Apple is a well-known entity, not a new entrant into the marketplace.
Since a sizable percentage of Apple’s most voracious music consumers are likely to initiate their free trails at launch, we are struggling to understand why rights holders would authorize their content on the service before October 1.
This is especially true in light of the potential revenue damage to a music label’s iTunes download revenues and impact on their cash flow. We will keep everyone informed as new details emerge in the press.
In the meantime, please do not feel rushed to sign Apple’s current offer.
If you’d like to discuss generic deal structures, please feel free to reach out to us at A2IM. A2IM understands that each music label must determine for themselves their own promotional and commerce plans and that we respect our member labels’ independent entrepreneurial spirit. We simply suggest to our members that before agreeing to any direct licenses, that they should please consider all factors and their effects on their music label’s results, now and in the future, and make an educated decision.
In accordance with the entrepreneurial spirit of our members who run their businesses, each of our members should continue to do what is in their business’s best interests knowing, whatever decision or statements they make, that every A2IM label member will always continue to get full A2IM support and benefits.
Image by Alexander Baxevanis, licensed under Creative Commons 2.0 Attribution Generic (CC by 2.0). Written while listening to Clams Casino.