Apple Music kicks off licensing renewals with new WMG deal

Spotify’s success in persuading labels to renew its licensing deals with a revenue-share more in its favour is starting to have a knock-on effect. Bloomberg reported overnight that Apple has renewed its own deal with Warner Music Group for its Apple Music service, paying “a smaller percentage of sales from Apple Music subscribers than it did under its first deal for the streaming service”.

Apple has been paying labels a 58% share of Apple Music revenues, with Bloomberg suggesting its desired new rate is 55% “which would decrease if subscriber numbers met targets”. That compares to the 52% rate that Spotify has reportedly negotiated with labels, although that is subject to similar clauses in terms of growth.

Whisper it quietly, but these deals do point to a climate of mutual ’skin in the game’ for keeping the growth we’ve seen in music subscriptions going, rather than the familiar (if partly unfair) stereotype of labels  squeezing the pips of digital partners. The performance targets are key to this: Spotify has long argued that a lower rev-share would not just help it reduce its losses, but would also fuel further investment in R&D and marketing to pull more music fans in to the subscription world.

Apple, of course, is in a different ballpark to Spotify when it comes to resources. But as its Services division becomes even more important to the company, restructuring its own deals – Bloomberg suggests Sony Music is close to an agreement, although Universal is “further off” – its incentive to invest in Apple Music remains strong.

Source: Bloomberg – http://tinyurl.com/y7jshtpz