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Apple and record labels still in talks just before WWDC

Apple and record labels still in talks just before WWDC

June 5, 2015

Reports over the last few weeks have us convinced that Apple will announce a new subscription-based music streaming service at WWDC on June 8. A recent report from Bloomberg suggests that Apple and the record labels are still negotiating terms just days before the announcement. These ongoing talks are because the record labels want more of the revenue from Apple than they receive from other services, sources say.

Right now, the record labels take 55 percent of Spotify’s monthly $9.99 rate. Publishers take another 15 percent. Sources have indicated that the record labels want to get closer to a 60 percent slice of the revenues from Apple’s streaming music service. Still, Apple and the record labels want to ink the deals before the June 8 event in San Francisco, so it seems like a question of who will blink first.

Apple wants to maintain its position as the entertainment industry’s most important collaborator, even as services like Spotify, Netflix, and others gain more popularity. Will that mean Cupertino is willing to concede an extra 5 percent of the revenues to the record labels? At the same time, streaming music has become so popular that the record labels want to ensure their contracts provide them some assurance of sharing in that growth.

Before you say there is no way Apple will give up even 5 percent of their revenues for the upcoming streaming music service, remember this. Cupertino, which has always taken 30 percent of all sales from App Store purchases and subscriptions, allowed HBO Now to pay a smaller cut of their revenues. Apple only takes 15 percent of the revenues from HBO Now subscriptions, a concession that might signal Cupertino’s willingness to accept a smaller cut from their streaming music service.

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