Become a MacRumors Supporter for $50/year with no ads, ability to filter front page stories, and private forums.

MacRumors

macrumors bot
Original poster
Apr 12, 2001
63,194
30,135



Spotify-Apple-Music-logos.jpg
Several of Spotify's contracts are up for renewal and the high rates Apple pays record labels are affecting Spotify's negotiations, reports MusicBusinessWorldwide. As it considers a future IPO, Spotify is aiming to strike long-term deals with record labels at lower rates, while labels want Spotify to pay as much as Apple does.

Spotify reportedly pays record labels 55 percent of its revenue, while Apple Music pays 58 percent (Apple is also said to pay more to publishers than Spotify does). Spotify was initially given a "marketing discount," but now record labels want Spotify to pay what Apple pays. Meanwhile, Spotify, in an effort to become profitable, wants to pay less.
The major labels, unimpressed with some of Spotify's recent spending decisions, believe that now's the time to up this figure. So where do they want to take it?

Well, it's common knowledge that Apple Music is paying 58% of revenue to labels - after users' free trial periods have finished. The majors want Spotify to move its revenue share up towards that point.

Loss-making Spotify, though, is attempting to push this revenue share down, say MBW's sources. Yup: that means paying labels and artists a smaller slice of the proceeds.
Spotify is arguing that Apple's revenue share rate only applies after a three-month free trial and that it simply doesn't have the spending power of Apple, Google, or Amazon, three of its main competitors all with deep pockets, large user bases, and other sources of revenue.

Negotiations remain "optimistic" according to MBW's sources, and the "likely outcome" is a licensing deal similar to the one Spotify has had for the last few years, but a deal has yet to be struck. Spotify is said to be considering "windowing" or making some new releases temporarily exclusive to paying customers as a way to lure labels into accepting a lower rate.

Spotify's contracts with Universal Music Group, Warner Music Group, and Sony Music Group are all expired, and while Spotify continues to license content on a month to month basis, the absence of a long-term plan could potentially affect the company's IPO plans. It is, however, said to be "out of the question" that the three major music labels will pull their content from Spotify.

Article Link: Apple's Deep Pockets Affecting Spotify Contract Renewals
 

macduke

macrumors G5
Jun 27, 2007
13,100
19,598
Apple will probably somehow be sued for this, even though they're paying the publishers more. It will be deemed "bad for the consumer" and the government will investigate it for being anti-trust since they have more negotiating power or some such B.S.
 

Makosuke

macrumors 604
Aug 15, 2001
6,661
1,242
The Cool Part of CA, USA
I can see how a record label intentionally wanting to prop up Spotify in order to maintain competition in the market might be willing to give them a better deal than Apple, but generally speaking, "Our competitor is giving you a higher percentage of their gross than we are, but we think we should pay you even less than we are now" is a really weak position to be negotiating from.

Especially since there is such a glut of alternatives out there. It's one thing to argue that you need a bigger cut because nobody can make money at your current rate; it's another entirely to argue that when others are already paying more than you are. That's pretty much just proof that you're either charging too little or doing it wrong.

Personally, if I subscribed to a music service, all else being equal if you told me that Service A gives more of my money to the artists than Service B, I'd choose Service A since they're giving more of my money to who I really want it to go to.
 

bpeeps

Suspended
May 6, 2011
3,678
4,629
I see a buyout approaching.
What would Apple gain in the long run from a Spotify buyout? It makes more sense to pressure them out of business, rather than buy. Apple doesn't stand to gain too much from a buyout. Especially when you consider the amount of Android users who would most likely travel to Google or Amazon over buying an Apple product to play Apple Music on. Apple would be buying these customers for no reason.
 

Eorlas

macrumors 65816
Feb 10, 2010
1,246
1,913
Personally, if I subscribed to a music service, all else being equal if you told me that Service A gives more of my money to the artists than Service B, I'd choose Service A since they're giving more of my money to who I really want it to go to.

The article says Apple gives more to the label, not to the artist. It doesn't necessarily mean the artists get to see more out of this deal as their contracts are decided by the label in regards to how much they'll get per stream of their song.

I don't like the idea of Spotify being in some deep waters, because I feel their service is superior. Large library, they've been around for a while, and their app/interface is really easy to use. Apple's feels clunky and unintuitive, and it feels like the music experience as a whole on iOS 9/10 is not as enjoyable. Spotify's contrast within their app is really welcome on the eyes as well, since they don't have the same fetish for bright white's like Apple does in pretty much all of their stock app experiences.
 

Juicy Box

macrumors 604
Sep 23, 2014
7,517
8,846
Why not just set the price to be fixed for all business to operate at a certain level 55%.
It then comes down to customer experience, which one offers the better experience.

Why would they take 55% if they could get more?

But, having it come down to experience is a great idea. I think if this was the case, the Mac OS in the 90's would have destroyed Win95 in market share.
 

TechZeke

macrumors 68020
Jul 29, 2012
2,453
2,266
Dallas, TX
How about spotify get rid of the money-sucking free-tier and pay more?

The money saved from getting rid of the free tier would probably make up the difference alone.

Apple is making money and Spotify is not. Perhaps Spotify should copy Apple's model? The competitors they complain about all have one thing in common: No free tiers.
 

Gasu E.

macrumors 603
Mar 20, 2004
5,029
3,138
Not far from Boston, MA.
The article says Apple gives more to the label, not to the artist. It doesn't necessarily mean the artists get to see more out of this deal as their contracts are decided by the label in regards to how much they'll get per stream of their song.

Yes, it does. Artists get a royalty, calculated based on the streaming revenue paid to the label for their songs. So if Apple pays the label more than Spotify, the artist gets more.
 

iMember

macrumors 6502
Mar 19, 2014
280
107
The reason i stopped using Spotify it's because Android users was also using it..so was no longer cool! I don't understand why Apple has released :apple: Music for Android? Droid users are having problems financially - money problems xD
 
  • Like
Reactions: myscrnnm

themachugger

macrumors member
Aug 26, 2010
83
214
The article says Apple gives more to the label, not to the artist. It doesn't necessarily mean the artists get to see more out of this deal as their contracts are decided by the label in regards to how much they'll get per stream of their song.

I don't like the idea of Spotify being in some deep waters, because I feel their service is superior. Large library, they've been around for a while, and their app/interface is really easy to use. Apple's feels clunky and unintuitive, and it feels like the music experience as a whole on iOS 9/10 is not as enjoyable. Spotify's contrast within their app is really welcome on the eyes as well, since they don't have the same fetish for bright white's like Apple does in pretty much all of their stock app experiences.

Generally, consumers will pay MORE for a superior experience. It's not like Apple built a huge following because they were the cheapest on the market. They earned it. If Spotify is really that much better, Spotify can raise their subscription price and be profitable, not whine to the record industry that they should pay less because "we are the little guy." Apple was once "the little guy" (nearly went out of business) and then they built a product that the world loved and happily paid a premium to have. That's one way competition works. Regardless, I'm sure the European Union will eventually find a way to call this "anti-competitive" and soak Apple with a big fine so the money will make its way back to Sweden somehow, even if Spotify goes belly-up. That's the modus operandi of the EU.
 

Mascots

macrumors 68000
Sep 5, 2009
1,665
1,414
Apple will drive everyone out of business then abandon the music market.

Apple negotiates great content deals, they're being shady and driving out the competition.
Apple pays high rate deals because of their size, they're driving out the competition.

Apple is competition, too, and it's not really them driving anyone out of business in this case. It's those who hold the golden keys to the content who are shifting the playing field in order to get the most that they can.
 
  • Like
Reactions: mdw1 and JoEw

thekeyring

macrumors 68040
Jan 5, 2012
3,485
2,147
London
Apple will probably somehow be sued for this, even though they're paying the publishers more. It will be deemed "bad for the consumer" and the government will investigate it for being anti-trust since they have more negotiating power or some such B.S.

The anti-competitive lawsuits always seemed odd to me. Especially hearing that Microsoft was in trouble for bundling Internet Explorer with Windows and that Google were in trouble for bundling Chrome with Android. What defines an OS feature, and what a separate product?

Is Apple anti-competitive because it doesn't allow third-party browsers to be default on iOS? What about third-party notification centres, or lock-screen clocks?

If you take it further...

Should Google not advertise Android or Chrome on it's home page? Isn't Apple using it's success in industries like the smartphone to give it an unfair advantage when it comes to advertising new products, like Apple Music or Apple Watch?

I'll never understand it, I don't think.
 

SandboxGeneral

Moderator emeritus
Sep 8, 2010
26,482
10,050
Detroit
I liked the service and the app and the UI of Spotify, but I was lured away by Google Play Music, a 4 month free trial period and YouTube Red. Clearly the major companies like Google and Apple are putting a big hurt on Spotify. I wonder if Spotify will be around in 2-3 years being that they're being squeezed from all sides and not making a profit at all.
 
Register on MacRumors! This sidebar will go away, and you'll see fewer ads.