The best approach towards Apple Music for these Indie labels, of course, is to wait for the service to grow. Let the big labels draw in the consumers and then, once the majority of the user base has already used up their free trial, you can add your products to a market that is primarily made up of paying subscribers.
Bingo! The issue for the indies is fear of the unknown. The safest tactic for them is to wait, and see what the real-world results turn out to be, before signing on the dotted line.
The labels are worried that this will be like an iPhone launch - a huge number of sales in the first few weeks to people who are currently iTunes' best customers, with sales at a lower, more manageable rate after initial demand has been satisfied. That pattern could indeed restrict revenues dramatically in the beginning.
I think the effect will be different, for several reasons. First, a fair number of iTunes' best customers are into possession/collecting - they love the idea of having a huge personal library. They know they could leave Apple tomorrow and, as long as they keep backing up their iTunes library, they'll have it forever. They know that quitting a subscription service means they lose everything they added to their playlists from that service. Second, I don't see the same kind of pent-up demand we see for a new iPhone. People haven't been delaying their subscription purchases until the next model arrives. If people like the service, then sales will build month over month as the word-of-mouth spreads - if there's any pain at all (which I doubt), it could be worse six months from now.
There's a third fear, which is that the subscription model earns them less than they'd earn on per-download sales. They already have data on this, since Spotify et. al. have been around for a while. If they've been losing money, then they need to stop working with every subscription service, not just Apple.
The pay-one-price model has amused me for a long time. When done correctly by the vendor, the average consumer ends up paying
more than they would have paid otherwise. Theme park tickets are a good example of this. Rather than feel the pain of reaching into your pocket for each ride (or each time you need to buy another strip of ride tickets), people feel the pain once and quickly move beyond it. Some will try to milk that all-you-can-eat ticket for all it's worth, and believe they've beaten the system if they ride more rides than they believe the park operator expected them to ride. Many more will simply have a good time, and leave having spent more than they would have on individual ride tickets. On average, the park operator comes out ahead, and as long as they've had a good time, their customers will come back again.
The trick for Apple is to recruit not only iTunes' best customers (those who will definitely pay less), but enough of iTunes fair-to-middling customers as well (who will likely pay more than they currently do). As long as there are enough of the latter to balance the former, all will be good in the world.
The labels will be getting a pro-rata share of subscription revenues. This means that, if subscribers end up spending more on Apple Music subscriptions than they would have paid for per-downloaded music, then the labels (and Apple) come out ahead. Since neither Apple nor the labels want to lose the money they could have made selling individual downloads, chances are that the subscription service will result in an equal (or more likely greater) profit, rather than less.
Auto-renewing subscriptions have been one of the great cash cows of publishing (especially the web). I don't expect that to change for music subscriptions. All the move to subscription music does is put the record labels on the same footing as the Hollywood TV and film companies who get their monthly cut from the cable companies. I can speak from my own company's experience - the pro-rata royalties we pay out for our subscription sales are substantially higher, on a per-copy basis, than the royalties we pay per copy for retail sales of the same works.
