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Beggars goes public on Apple Music deal

By Chris Cooke | Published on Thursday 18 June 2015

So, the official Apple Music ‘diss line’ is getting rather long isn’t it? Spotify should walk down the queue handing out refreshments. After all, anger in the indie community over Apple’s proposed streaming music deal has conveniently distracted everyone from the real controversy in digital music this month: Spotify’s Greengate scandal.

But yes, following statements from both the UK and US indie label trade bodies criticising elements of the current Apple Music deal, yesterday one key independent label expressed similar frustrations direct. While again stressing that Apple was a long-term valued business partner, the Beggars Group told its artists and their managers that the deal for the tech giant’s new streaming service had been presented without proper consultation and that certain terms were untenable.

Remarking on Apple’s move into streaming music, the Beggars memo says: “In many ways the deal structure is very progressive, but unfortunately it was created without reference to us, or as far as we know any independents, and as such unsurprisingly presents problems for us, and for our coming artist releases”.

As previously reported, the most contentious of Apple’s terms is that it pays no royalties at all while users are on a free trial. Which, while not entirely unprecedented in the streaming market, is problematic because Apple Music will offer users a three month free trial as it tries to hook them into its $10 a month service. And this would mean no royalties at all during July, August and September, when the service first goes live, presumably in the wake of a mega-bucks ad campaign. Indies worry about the impact that summer of free music will have on their download and Spotify income, both key revenue streams.

On that point, the Beggars statement continues: “We are naturally very concerned, especially for artists releasing new albums in the next three months, that all streaming on the new service will be unremunerated until the end of September. Whilst we understand the logic of their proposal and their aim to introduce a subscription-only service, we struggle to see why rights owners and artists should bear this aspect of Apple’s customer acquisition costs”.

In addition to the free trial issue, the Beggars memo deals with two other topics, the usual concern that the majors might be getting a better deal than the indies, and also that the Artist Connect part of the new service – which encourages artists to engage with fans by uploading extra tracks, videos and photos – is also unmonetised. Why would labels put videos on Apple Music for free, when even the big bad YouTube is paying some royalties?

Say Beggars: “We are also naturally concerned, as ever, as to whether we and you are being treated on a level playing field vis a vis the major labels and their artists. Additionally, we have reservations about both commercial and practical aspects of the Artist Connect area. It is a mistake to treat these rights as royalty free, especially in the light of recent licenses with services like SoundCloud”.

Concluding, the statement reads: “At the moment we do not have an agreement with Apple Music that would allow us to participate in the new service. However, we very much hope that the obstacles to agreement can be removed, for us and for independent Merlin-member labels as a whole, and that we will be able to fully support this potentially exciting new service in the coming days”.

The there mentioned Merlin, of course, usually negotiates terms with new streaming services on behalf of a significant portion of the indie label community, including Beggars, but is not directly involved here because Apple’s deals with the independents pre-date the creation of the digital rights group. The whole point of Merlin is that it enables affiliated indies to make deals as one, strengthening their negotiating hand overall, especially when it comes to matching any of the kickbacks enjoyed by the majors.

The deals between Apple and Sony, Universal and Warner are, of course, secret, though insiders say that they won’t be getting royalty payments while users are on the free trial either. Though that doesn’t mean there weren’t benefits elsewhere in the deal to compensate for that fact.

Indeed, Apple has already said it is offering 2-3% more than some of its competitors on the revenue share part of the streaming deal, in part to make up for the upfront commitments the labels are making in support of the free trial promotion. For the majors, where short-term cashflow is less of an issue, such a value exchange may have been enough to overcome the free trial concerns, even though artists signed to the majors with big releases out during this royalty-lite summer might disagree.

Back in the indie community, where short-term cash flow is often a much bigger concern, even those who agree that, ultimately, Apple’s higher-rev-share-for-three-month-free exchange is a fair deal, may be nervous about the impact three months of freebies on Apple Music will have on download and Spotify income.

Though, some more conciliatory indies have conceded that – unlike the initial YouTube proposition that caused so much anger last summer – Apple’s deal isn’t “all in or all out”, in that they can continue to sell music in the iTunes download store without being in the new streaming service.

And they can opt to have catalogue in the streaming service, but new releases only available for download for the time being. Or just allow for streaming the new content that is already posted to SoundCloud, many labels being used to having freebie streaming going on over here in a bid to drive downloads or paid-for streaming over there. At least some indie label distributors are expected to enter into an agreement with Apple Music this month so that their clients can pump content into the streaming service as and when they wish to.

If Apple doesn’t budge before the end of the month, and it may well not, it will be interesting to see how many labels reluctantly accept a suck-it-and-see approach, and how many stand their ground and boycott the streaming element of the all new Apple Music as it goes into hype overdrive.

So, plenty more wrangling to come. Meanwhile, Digital Music News has published the contract that is causing all the hoo haa, if you’re a fan of long tedious documents.