Credit: Jason Persse/Flickr

Apple's streaming service 'screws' indie music labels

Music lovers will rejoice at Apple's three-month free trial of its new streaming service. Independent labels, not so much.

by Adam Gale
Last Updated: 23 Sep 2015

It’s been a tough decade for the music industry. Illegal downloads gutted its revenues, and so far the digital tag team (or should that be a duet?) of legal downloads and music streaming has failed to make up for it. You’d expect therefore that the prospect of the mighty Apple entering the streaming market might have warmed even the most jaded of record producers’ hearts.

Apparently not. Independent labels on both sides of the Atlantic have slammed the service, Apple Music, which launches on June 30. Andy Heath, chairman of the lobby group UK Music, went so far as to tell the Telegraph that ‘smaller labels would be completely screwed’, and that ‘it will literally put some people out of business’.

At issue is Apple’s super-generous, three-month free trial. Music lovers and cheapskates everywhere may delight in that, but it’s the music labels that are footing the bill. Apple’s 250-page contracts make it very clear that it’s not paying royalties for the first three months.

That isn’t necessarily a case of the world’s largest company tightening the screw on an already stretched industry. Apple is offering a slightly higher royalty rate than rival Spotify, with 71.5% of revenues from its $10 a month (UK prices still to be confirmed) charges going back to music owners and producers in the US and an average of 73% elsewhere. Spotify meanwhile only offers 70%.  

What it does mean is that smaller labels may be unwilling or unable to sign up, leaving the prospect of artists like Adele or Radiohead being absent from the line-up.

This isn’t likely to stop Apple. The tech giant’s hand is just too strong. When Beats entrepreneur, industry mogul and fresh Apple recruit Jimmy Iovine launched Apple Music last week, he pointed out that the company had sold a billion iOS devices, while a similar number of people have iTunes accounts.

All Apple will need is for a tenth of those people to start paying for the service, which includes internet radio and ‘social’ functions alongside on-demand streaming, and it will already become a bigger player than market leader Spotify. As Apple Music will be automatically included in the next iOS update and will easily mesh with users’ existing downloads, that doesn’t seem so unlikely.

Of course, holes in the music offering could scupper the plan, but the major labels know which way their bread’s buttered. They can’t afford to fight Apple on this and do, after all, want streaming to grow. The biggest labels have indeed already signed up.

Even if independent labels do hold back, it probably won't be for long. Many Apple customers are likely to sign up to their free trial upon its launch at the end of the month, so indie labels could just wait it out. ‘We are struggling to understand why rights holders would authorise their content on the service before October 1st,’ wrote the American Association for Independent Music.

It might seem a bit unfair for an organisation with at least $150bn (£97.4bn) in cash to make smaller companies pay for its launch, but the fact is Apple can. Besides, as it might well point out, the company has a history of making history. It would seem unwise to bet against them making a success of it, and taking the labels along for the ride.

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