Apple Music Lands Over 20,000 Indie Labels as Beggars Group and Merlin Sign Deal

[Rogifan]

So is Google paying apple level royalties in their ad supported songza service or will they be screwing the artists like Spotify does.

I thought Spotify wasn't profitable? In that case wouldn't it be the consumers who don't want to pay screwing the artists?

I think this has been a huge discussion point between Apple and the major labels over the last months, which ultimately could have endangered Apple Music altogether. So I would be surprised if they had been doing this just "to see if it works".

I wouldn't call it a knack. They decided basically at the last possible moment to do what is perceived as the "right thing". Had they waited any longer, it might have turned into a major publicity disaster, and I think they felt that the train was slowly leaving the station.

Apple has fallen into bad outcomes quite a few times as well - for example with "You're holding it wrong!" They have only been lucky that it has not affected their bottom line in a major way.

Agree with this. It could have turned into a huge PR nightmare. Apple has no choice but to do a 180.

 

[TWSS37]

They said so in their reversal message... that they had heard from many smaller artists before Swift's open letter and her move was just the final straw.

The conspiracy theorist in me says that Apple knew Swift would do something like this (since she has taken a similar stance before) and made this a calculated risk... That if she went public, they would immediately relent, and use that to get her music on their platform, thus giving Apple Music an advantage over other platforms.

 

[HobeSoundDarryl]

Could be. I think Apple has grown beyond such a gimmicky PR play (or, at least, I hope so). My suspicions are that the bean counters have gained a little too much influence at Apple and I wonder if the departure of the head of PR last year (Katie Cotton) caused the management team to lose a powerful influence that was apparently strong & vocal enough to proactively recognize such scenarios and encourage Apple to do the right thing ahead of a rollout, rather than looking like a greedy corporation who was brought to their senses by the gripes of a handful of independent artists and one superstar.

If Cotton had that much influence and ability (and I suspect she did), they could have proactively rolled out the reversal AT the "one more thing" reveal and perhaps had Swift herself as the musical guest to both tout the greatness of Apple and the greatness of the arrangement for all artists: superstars & starving. Personally, I believe that would have been much more effective and more like the Apple we collectively believe is there, rather than the one that sometimes appears to show some old "we can do anything we want" Microsoft-like warts.

Image is an important thing to nurture & protect. Game playing that temporarily tarnishes the image only to reverse and somewhat repair the image in the last week doesn't fully repair the image. For example, conspiracy theory implies the concept of Apple plotting to put one over on all of us. Even if the end result seems positive to all involved (and even if we try to spin such a play as "marketing genius"), the connotations of such manipulation is usually considered negative, at least by some. If this was one big tricky play, I wouldn't have done it this way if I was in charge.

 

[iBreatheApple]

While I do understand the perspective of that artist that it was quite ludicrous for them to try and not compensate the artists, but how can labels be so stubborn as to say we'd rather make no money ever by opting-out of Apple Music rather than 'renting' out for free for three months? They only way I could ever see a decision like that as rational is if they would make more money selling their music in three months than they could ever make with Apple Music, provided this thought process was r/t a loss of sales because of free streaming. Not that I have statistics or proof, but that seems impossible.

 

[koruki]

The lack of Indie signup was the real reason Apple changed direction on royalty fees, Swift is just getting the credit.

Would have been fine for Apple Music to launch a free trial without a Taylor Swift album music lovers don't care about but a disaster to launch with 50% of Spotifys music catalogue and a depleted search for music fans who actually like a diverse range of acts to find. The service would be DOA and the internet would be full of "Apple music doesn't even have artist X".

I didn't help that Cue tweeted to Swift saying it was HER that changed their mind did it. If Steve was still around, he may have still changed directions, but I doubt he'd make such a tweet positioning their rear side twerking up against Swift.

 

[HobeSoundDarryl]

The labels are in. Apparently, it's free trial as presented (pre-reversal) in terms of label compensation. Basically, the labels are rich enough in this deal to weather whatever hits they could take to their current cash flows from iTunes during the free trial. OR, as others have put it, they can afford to take a longer view of the upside beyond 3 months and just roll with sharing in the risk by offering their stable of content rent-free for 3 months.

In this reversal, it's the slivers of what the labels are paid in that 72% cut that goes to the artists and THAT will apparently be covered by Apple during the trial (or probably even less than that since some clarification comments makes it sound like free trial comp will be based on what is actually played during the trial). If so, this really doesn't cost Apple much at all, as the labels deals with their artists in general are thoroughly exploitative relative to what the label keeps for the value it delivers, so those of us worrying about what this will cost Apple is really worrying about very little hard cash... easily recouped with even moderate success after 90 days, if a fair amount of those trials start paying.

In another thread one guy thought this might cost Apple about $18 million. Do the math to see how much Apple could make each month AFTER 90 days: my own guess is about 25 million paying subscribers (which is apparently only 5 million more than Spotify has now) at $2.80 per month (which is Apple's cut right off the top) = $70 MILLION PER MONTH. Now that's not all profit but I believe there is plenty of profit in there (in spite of the much slung infrastructure and R&D argument, else if the latter is so expensive that there's hardly any profit in this, why is fat-profit-margin-hungry Apple messing around with this business?). And of course, if one assumes that Apple can't get more paying subscribers than Spotify even though Apple is going to do a Microsoft IE embedded in the OS play here, pick your own number of paying subscribers and multiply by $2.80. How many months does it take to wash $18 million?

Of course, the $18 million number could be wrong too. But at my $70 million/month guesstimate or your own guesstimate more or less than that, even $50 million in free trial cost is going to get washed in a few months. After that month or a few months post-trial period, that $70 million or your number just keeps on coming, month after month. About the time the free trial ends for millions of us, iOS9 rolls out with this service as a default for EVERY SINGLE iDevice user on the planet. So it seems favorable in the math and revenue potentials that whether it's going to be my guesstimate of $70 million/month or your number, whatever the number, it's more likely to go up than down. The hard cost expensed for this free trial- whatever it is- can only go down since it doesn't accumulate indefinitely.

So even if the most pessimistic among us can find a way to get that total cost to- say- $100 million, my guess of $70/million recoups it in revenues in 2 months and my guess that there are healthy profit margins in this for Apple implies maybe 3-5 months to recoup it in profits. If your guess is <$70 million, even vs. $100 million, it shouldn't take that long for Apple to wash the expense... and then your revenue or mine will just keep on pouring in... for (potentially) years to come.

Looking forward from this point through our short-term lens, all we see is some ambiguous level of cost for Apple with no revenue. But hop in your time machine and jump forward 12 months. Then, look backwards at the 3 month trial vs. what Apple has made for the 9 months since. That will create an entirely different view. Hop forward another 12 months and take another look at 21 months of revenues vs. the 3-month trial. Make up your own numbers. Apple will do great here unless pretty much nobody wants to pay for this streaming music service that will be the default in iOS9.

 

[ThatsMeRight]

The labels are in. Apparently, it's free trial as presented (pre-reversal) in terms of label compensation. Basically, the labels are rich enough in this deal to weather whatever hits they could take to their current cash flows from iTunes during the free trial. OR, as others have put it, they can afford to take a longer view of the upside beyond 3 months and just roll with sharing in the risk by offering their stable of content rent-free for 3 months.

In this reversal, it's the slivers of what the labels are paid in that 72% cut that goes to the artists and THAT will apparently be covered by Apple during the trial (or probably even less than that since some clarification comments makes it sound like free trial comp will be based on what is actually played during the trial). If so, this really doesn't cost Apple much at all, as the labels deals with their artists in general are thoroughly exploitative relative to what the label keeps for the value it delivers, so those of us worrying about what this will cost Apple is really worrying about very little hard cash... easily recouped with even moderate success after 90 days, if a fair amount of those trials start paying.

In another thread one guy thought this might cost Apple about $18 million. Do the math to see how much Apple could make each month AFTER 90 days: my own guess is about 25 million paying subscribers (which is apparently only 5 million more than Spotify has now) at $2.80 per month (which is Apple's cut right off the top) = $70 MILLION PER MONTH. Now that's not all profit but I believe there is plenty of profit in there (in spite of the much slung infrastructure and R&D argument, else if the latter is so expensive that there's hardly any profit in this, why is fat-profit-margin-hungry Apple messing around with this business?). And of course, if one assumes that Apple can't get more paying subscribers than Spotify even though Apple is going to do a Microsoft IE embedded in the OS play here, pick your own number of paying subscribers and multiply by $2.80. How many months does it take to wash $18 million?

Of course, the $18 million number could be wrong too. But at my $70 million/month guesstimate or your own guesstimate more or less than that, even $50 million in free trial cost is going to get washed in a few months. After that month or a few months post-trial period, that $70 million or your number just keeps on coming, month after month. About the time the free trial ends for millions of us, iOS9 rolls out with this service as a default for EVERY SINGLE iDevice user on the planet. So it seems favorable in the math and revenue potentials that whether it's going to be my guesstimate of $70 million/month or your number, whatever the number, it's more likely to go up than down. The hard cost expensed for this free trial- whatever it is- can only go down since it doesn't accumulate indefinitely.

So even if the most pessimistic among us can find a way to get that total cost to- say- $100 million, my guess of $70/million recoups it in revenues in 2 months and my guess that there are healthy profit margins in this for Apple implies maybe 3-5 months to recoup it in profits. If your guess is <$70 million, even vs. $100 million, it shouldn't take that long for Apple to wash the expense... and then your revenue or mine will just keep on pouring in... for (potentially) years to come.

Looking forward from this point through our short-term lens, all we see is some ambiguous level of cost for Apple with no revenue. But hop in your time machine and jump forward 12 months. Then, look backwards at the 3 month trial vs. what Apple has made for the 9 months since. That will create an entirely different view. Hop forward another 12 months and take another look at 21 months of revenues vs. the 3-month trial. Make up your own numbers. Apple will do great here unless pretty much nobody wants to pay for this streaming music service that will be the default in iOS9.

Apple won't have 25 million paying subscribers after the trial period ends. Definitely not. There is very little buzz surrounding Apple Music. In fact, most of the buzz is in the United States- already quite a competitive market with many offerings.
In Europe, Apple's going to have an even harder time. Spotify is the streaming service to use - mention Spotify to an 80 year-old and that person will know that it is a music app. Spotify has the mindshare in Europe. In fact, I'm confident that most people in Europe are able, at BEST, to name just one competitor of Spotify.

Mindshare is important and, right now, Apple Music is something most people do not know about. The only advantage Apple has is that Apple Music will ship on nearly every iOS device... but even than... people won't leave their current streaming services 'just because there is something new'. And in Europe, it will have an even harder time gaining traction because, as it appears right now, a credit card is required... and it just happens to be that the majority of the Europeans use debit instead of credit cards.

You make some good points, but I think you are a bit too optimistic about the number of paying subscribers in such a short period of time.

Oh, and yes. Music streaming is the future. Sooner or later, a majority of the people will use a streaming service. But, again, I don't think it is going to happen at the tempo you are talking about.

 

[dannys1]

Except it's one of the highest selling albums of 2014/2015. She's one of the few people that can hit a million sales in a week.

So? Whats that go to do with anything? The people who actively talk about music steaming services are music fans and they're not streaming Taylor Switch albums.

You may be confusing music lovers with music snobs

Well there are entire genres of music whom are wholly supported by indie labels, and the multi-tude of people who listen to them far out weight Taylor Swift fans. I'd call them normal people into music, where as Taylor Swift fans are - I don't know, mainstream consumers I guess.

Launch with 50% of Spotify's music catalogue? Prior to this indie deal, apple had 37 million songs to Spotify's 30 million. https://www.macrumors.com/2015/06/10/spotify-75m-active-users-526m-funding/

In correct, that was based on the iTunes library. Entire genres of music labels were holding back from being part of the free trial. We're talking most of electronic music, downtempo, house, techno, breaks. None of these labels were willing to sign the original agreement - the 37 million counted all of those as well as all the large well known artists like Adele as part of the Beggers group.

Hate to break it to you, but that album that "music lovers don't care about" probably brings in more revenue than everything else that "music lovers" do care about.

Gamers aren't the main consumers of video games, tech geeks aren't the main consumers of technology, and music lovers aren't the main consumers of music. Heck, mainstream consumers are the reason why Apple is as big as it is.

Possibly but you're thinking about it all wrong in this case. No one is going to chose one streaming service over another because of Taylor Swift. If you only care about Taylor Swift you buy her album, simple. The people who want to pay to listen to unlimited music a month have a larger choice they are into. We're talking about entire genres controlled by indie labels, house, electronica, techno, breaks. More than half of the British pop charts are made up of indie label releases, or even major artists now on their own labels. If all this was missing from Apple Music - but it was on Spotify or Rdio, and Taylor Swift wasn't...Apple Music would be the dead service pretty quickly, not Spotify because it doesn't have a Taylor Swift album.

In fact - without figures, i'd hazard to guess Spotify didn't lose any subscribers from losing Taylor Swifts music.

 

[HobeSoundDarryl]

You make some good points, but I think you are a bit too optimistic about the number of paying subscribers in such a short period of time.

Like I said, pick your own number and the business math looking back from 1 year from now can look great down to even Apple getting a tiny fraction of Spotify's paid subscriber count. I'm guessing at 25 million and I certainly may be too optimistic there. However, that would only be 5 million more than Spotify has now. Sure, it's taken a LONG time for Spotify to get to 20 million but Apple will have several key advantages: Apple Marketing, Apple PR and, most importantly, it will be embedded as default in iOS9.

Apple has shared a goal of 100 Million users, which I interpret as 100 Million free trials (because the business math would be crazy amazing if that was 100 Million paid users: 100 million times 2.80 per month = $280 million/month or $3.3 Billion/yr). I can see 100 Million free trials based upon the iOS9 embedded part + free trial. So 25 Million paying subscribers means converting about 25% of them. That's a tall order but not impossible. However, pick a number and then do the math. 25 Million is worth about $70 Million/month in revenues. Half that number at 12.5 Million subs and that amount yields $45 Million/month in revenues. Cut again to 6 Million subs and its $16.8 Million/month in revenues.

Now again, revenues are not profit, but I suspect there's much more profit in Apple's cut than many of us "but the infrastructure and R&D" people have been spinning last few days (else, if there's so little profit in this, why is Apple bothering with all that expensive infrastructure and R&D that apparently never lets up). So if one picks a more conservative number like 6 Million paying subscribers for $16.8 Million/month, how long does it take to make up for this free trial cost many of us seem to be imagining as some tremendous burden?

What do we think that cost will be? Pick that number too and then run one through time post-trial against the debt of the other and see how long it takes to recoup. Even if we speculate a huge number like $100 million for the free trial cost, 100/16.8 = 6 months for revenue recoup. Assign a profit margin to that and it will have to be a small one to not wash even $100 million within the year. And if the profit is really that small, why is Apple bothering with this apparently barely-profitable business?

That's the thing. It doesn't matter if I'm guessing right about a number like 25 Million or someone else is guessing right at 12 or 6 or 50 million. The point is pick both numbers and then march through time and watch how the passage of time recoups the debt... and then keeps on piling on relatively nice revenue gains for years and years to come after the debt is completely washed.

 

[bpeeps]

So? Whats that go to do with anything? The people who actively talk about music steaming services are music fans and they're not streaming Taylor Switch albums.

You're coming off pretty music snobbish in all of your replies here. If you can't understand the correlation, especially after multiple people have explained it to you already, I have no further comments.

 

[jameskatt]

Hate to break it to you, but that album that "music lovers don't care about" probably brings in more revenue than everything else that "music lovers" do care about.

Gamers aren't the main consumers of video games, tech geeks aren't the main consumers of technology, and music lovers aren't the main consumers of music. Heck, mainstream consumers are the reason why Apple is as big as it is.

Itunes Music Radio already streams Taylor Swift's latest album - for FREE to users with ad support.

 

[jeffe]

I hope people don't have a notion in their heads here thinking Apple is contractually required to continue paying artists even if Music fails to get a decent amount of subscriptions.

I'm confused. Are you saying Apple should only have to pay artists unless if they get a decent amount of subscriptions? What level is a decent amount?

While I do understand the perspective of that artist that it was quite ludicrous for them to try and not compensate the artists, but how can labels be so stubborn as to say we'd rather make no money ever by opting-out of Apple Music rather than 'renting' out for free for three months?

I'm sure it varies. If I was a label with popular artists, I would sign up after the service was live for a year. At that point, user's using a free trial would be much less significant than what it will be for the next three months

I don't think labels are losing much by witholding their music for a few months.

 

[Soylent Yellow]

Gamers aren't the main consumers of video games, tech geeks aren't the main consumers of technology, and music lovers aren't the main consumers of music. Heck, mainstream consumers are the reason why Apple is as big as it is.

As a music lover I would love to disagree with you, but you are right.

 

[fatboyslick]

XL Recordings is one of the most important labels in the music industry - I wouldn't have called them small by any means

 

[leon44]

Nice try.

Thanks

 

[cwt1nospam]

Maybe if you were looking at the forest: "Personal use case. Nothing else matters." instead of staring at the trees: "Does what I need it to do" you'd realize it's a statement about not being beholden to a brand. Either way, as long as I get it we'll all be okay

I was looking. The Google stuff you buy is reporting information about you that you aren't aware of, and have no control over. Maybe I'm wrong though. Maybe you want that?

Plus, like it or not, when you buy a computer or cell phone, you are beholden to a brand. That's why the brand you buy is important.

 

[69Mustang]

I was looking. The Google stuff you buy is reporting information about you that you aren't aware of, and have no control over. Maybe I'm wrong though. Maybe you want that?

Yeah you are wrong. I am aware of what Google actually does. It sounds like you aren't though. Google tracks usage of their services to aggregate data and form anonymous profiles used to sell ad space. Fortunately, I can opt out of a lot of that tracking. Since Apple tracks, aggregates, and creates anonymous profiles for selling ad space as well, I can do the same opt out with my Apple products. Like the majority of people, I don't view Apple and Google as good or evil. They are companies that sell products and services. Some of the products I like, some I don't. They are simply vendors vying for my dollar. I like Apple no more or less than Google, Microsoft, Samsung, or any other company. None of them matter to me. What they sell does - sometimes.

 

[cwt1nospam]

They are companies that sell products and services. Some of the products I like, some I don't. They are simply vendors vying for my dollar. I like Apple no more or less than Google, Microsoft, Samsung, or any other company. None of them matter to me. What they sell does - sometimes.

No, they're not. Google isn't vying for your dollar. You aren't the customer, you're the product.

 

[HenryDJP]

I'm confused. Are you saying Apple should only have to pay artists unless if they get a decent amount of subscriptions? What level is a decent amount?

I should've worded that a bit different. I just meant that if Apple is paying the artists per play (as I believe Spotify is doing) then a lower amount of subs will result in a lower amount of plays, which results in a lower chance of artists (especially smaller artists) making money. I don't think has been confirmed if Apple is paying artists a standard rate for just being on Music. I highly doubt it.

 

[Tech198]

ok,, Prodigy ? well... its amazing how many labels will get on board simply because of a change of heart in Apple's policy...

I would of thought it all out before hand... but at least Apple realized it.

 

[dec.]

Like I said, pick your own number and the business math looking back from 1 year from now can look great down to even Apple getting a tiny fraction of Spotify's paid subscriber count. I'm guessing at 25 million and I certainly may be too optimistic there. However, that would only be 5 million more than Spotify has now. Sure, it's taken a LONG time for Spotify to get to 20 million but Apple will have several key advantages: Apple Marketing, Apple PR and, most importantly, it will be embedded as default in iOS9.

Apple has shared a goal of 100 Million users, which I interpret as 100 Million free trials (because the business math would be crazy amazing if that was 100 Million paid users: 100 million times 2.80 per month = $280 million/month or $3.3 Billion/yr). I can see 100 Million free trials based upon the iOS9 embedded part + free trial. So 25 Million paying subscribers means converting about 25% of them. That's a tall order but not impossible. However, pick a number and then do the math. 25 Million is worth about $70 Million/month in revenues. Half that number at 12.5 Million subs and that amount yields $45 Million/month in revenues. Cut again to 6 Million subs and its $16.8 Million/month in revenues.

Now again, revenues are not profit, but I suspect there's much more profit in Apple's cut than many of us "but the infrastructure and R&D" people have been spinning last few days (else, if there's so little profit in this, why is Apple bothering with all that expensive infrastructure and R&D that apparently never lets up). So if one picks a more conservative number like 6 Million paying subscribers for $16.8 Million/month, how long does it take to make up for this free trial cost many of us seem to be imagining as some tremendous burden?

What do we think that cost will be? Pick that number too and then run one through time post-trial against the debt of the other and see how long it takes to recoup. Even if we speculate a huge number like $100 million for the free trial cost, 100/16.8 = 6 months for revenue recoup. Assign a profit margin to that and it will have to be a small one to not wash even $100 million within the year. And if the profit is really that small, why is Apple bothering with this apparently barely-profitable business?

That's the thing. It doesn't matter if I'm guessing right about a number like 25 Million or someone else is guessing right at 12 or 6 or 50 million. The point is pick both numbers and then march through time and watch how the passage of time recoups the debt... and then keeps on piling on relatively nice revenue gains for years and years to come after the debt is completely washed.

So do you hate Apple more or less now?

 

[LethalWolfe]

Now again, revenues are not profit, but I suspect there's much more profit in Apple's cut than many of us "but the infrastructure and R&D" people have been spinning last few days (else, if there's so little profit in this, why is Apple bothering with all that expensive infrastructure and R&D that apparently never lets up).

I haven't read the whole thread, so apologies if this was mentioned previously, but there were reports last year that Apple wanted to charge $4.99/mo (and it was the major labels that pushed them up to $9.99) so I don't think anyone should fret over the 'hit' Apple itself will take from the free trial. IMO Apple wanted to undercut Spotify and Apple totally can because they make money selling hardware where as Spotify makes money streaming music. When the iTMS first launch Jobs was asked about possible competition and his reply was basically that no music service can afford to compete with them because no other music service sells devices like the iPod. Amazon was the first company to get into downloadable music that could match Apple at its own game. IIRC Amazon also got DRM-free music before Apple which could have been a 'gift' from the major labels to hopefully loosen Apple's hold on the downloadable music market.

iTMS was designed as a break even venture to sell hardware and I think Apple wanted to pull the same tactic in the streaming market, but the major labels wanted competition. They become too beholden to Apple in the past so they stopped Apple from majorly undercutting Spotify on price. At least that's my theory.

With regards to R&D in general... it's not like Apple doesn't already have massive server farms. Sure, Apple Music is going to put on an additional load but Apple has been slinging music, apps, and videos (which are way bigger than songs) across the Internet for over a decade. There's already a lot of existing knowledge and infrastructure that can be tapped into.

 

[dannys1]

You're coming off pretty music snobbish in all of your replies here. If you can't understand the correlation, especially after multiple people have explained it to you already, I have no further comments.

Mate, not liking Taylor Swift is not where near the realms of musical snobbishness. I am a record producer by trade originally so obviously i've got an interest in real artists and artisanship, but favouring house over Taylor Swift isn't harder decrying modern music over Phillip Glass.

If you think what i'm describing has anything to do with music snobbishness you've both no idea what a music snob is a no idea what i'm actually going on about in explaining how the indies make up more than 70% of the entire music industry worldwide if not more.

 

[bpeeps]

Mate, not liking Taylor Swift is not where near the realms of musical snobbishness. I am a record producer by trade originally so obviously i've got an interest in real artists and artisanship, but favouring house over Taylor Swift isn't harder decrying modern music over Phillip Glass.

If you think what i'm describing has anything to do with music snobbishness you've both no idea what a music snob is a no idea what i'm actually going on about in explaining how the indies make up more than 70% of the entire music industry worldwide if not more.

Decrying her accomplishments (which you've done repeatedly here) because you don't care for her is exactly what a music snob is. And duh, of course there are more independent artists than there are mainstream ones. This is true of any facet of entertainment, lmao. Most actors aren't recognixed like Tom Hanks level. Not sure why you're basing your entire argument off of the ridiculous obvious.

 

[Michael Goff]

No, they're not. Google isn't vying for your dollar. You aren't the customer, you're the product.

Why do people keep spewing that line? It isn't anywhere near true.