News that Spotify had negotiated a lower revenue-share licensing deal with Universal Music was clearly going to have a knock-on effect.
Bloomberg’s report yesterday that Apple is aiming to follow suit in its own licensing renewals comes as no surprise.
“The negotiations would bring Apple closer to the rate Spotify Ltd. pays labels, and allow both sides to adjust to the new realities of the music industry,” it reported.
It’s thought that Spotify’s payout under the UMG deal has reduced from 55% of its revenues to 52%, while Apple Music’s original deals are thought to be around the 58% mark.
“The labels are open to a reduction in Apple’s rate – provided it’s also able to expand subscriber rolls and meet other requirements,” claimed Bloomberg, noting that one of those requirements is continuing to promote iTunes in markets where streaming is still nascent.
While some reports have mischaracterised Spotify and Apple’s negotiations as trying to pay “less” to labels, the key here is the emphasis on subscriber growth.
The desired outcome is that the streaming services pay considerably more ultimately, because the lower rev-share will help them put even more welly into growing their paid subscribers.