Apple Music’s royalty rates complicate Spotify’s contract negotiations

Apple Music’s royalty rates complicate Spotify’s contract negotiations

Apple Music’s entry into the streaming music business has major labels asking Spotify for a larger share of its revenue, Music Business Worldwide reports. Spotify’s contracts with Universal, Warner and Sony have all expired, and while the labels want Spotify to up their revenue share from 55 percent to something closer to the 58 percent Apple currently pays, Spotify is trying to push what it pays even further down. Spotify is getting by on rolling month-to-month licensing agreements for the time being, but its decision to begin offering a carbon copy of Apple Music’s family plan with no long-term licensing agreements in place has rubbed labels the wrong way.
Spotify’s negotiators have pointed out that Apple Music’s 58 percent rate only applies after a user’s three-month trial expires, so in reality, a blended rate covering trial periods would actually be less impressive. Spotify also doesn’t have Apple’s spending power and can’t continue to absorb the massive losses it’s been posting, losing $194 million across 2015 alone while taking in revenues of more than $2 billion for the year. Competition from Apple Music’s exclusive releases from artists like Drake and Frank Ocean has driven Spotify to reluctantly pursue its own exclusive deals and even consider moving some albums off Spotify’s free tier to drive users to Spotify Premium. While that option has its proponents, one senior major label figure said, “Spotify’s free tier is one of its only real effective advantages over tech giants with masses of resources. We all understand that – and the last place most of us want streaming to end up is a straight fight between Apple and Google.”

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