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Apple seeking to lower rate paid to labels as it renegotiates Apple Music agreements

A new report from Bloomberg today says that Apple is looking to revise its deals with the record industry. Specifically, Apple is seeking to lower the share of revenue that record labels receive from Apple Music plays…

The report explains that Apple’s current deal with major labels is up at the end of June and both parties are currently in the process of renegotiating. Though, if a new deal isn’t reached by the end of the month, the current agreement will reportedly be extended for the time being.

Apple is reportedly looking to bring its royalty rate closer to what Spotify pays labels. Currently, record labels receive about 58 percent of revenue from Apple Music subscribers, whereas Spotify pays out about 52 percent. Spotify recently renegotiated its rate from 55 percent to 52 percent, contingent upon subscriber growth guarantees.

The record labels are said to be open to a reduction to Apple’s rate, but they also want promises on subscriber growth and other factors. Apple originally overpaid labels as a way to get them to come on board with Apple Music, as most labels were fearful that the service would cannibalize iTunes sales altogether.

For instance some labels have asked Apple to commit to promoting iTunes, both in general and in countries where streaming is not as prevalent, such as Japan and Germany.

Under Apple’s current deal, record labels at first received about 58 percent of revenue from Apple Music subscribers, a higher than they got from other major streaming services including Spotify. Spotify reduced its rate to 52 percent from 55 percent in recent negotiations with labels, tied to certain guarantees on subscriber growth. The labels are open to a reduction in Apple’s rate — provided it’s also able to expand subscriber rolls and meet other requirements, the people said.

For labels, streaming services have returned a bit of hope to the music industry, which rebounded 5.9 percent last year thanks in large part to Apple Music and Spotify.

Apple infamously sparred with some artists over the fact that it would not pay royalties during Apple Music’s three-month trial. After backlash, however, the company agreed to pay artists during the trial. In the past, the RIAA has praised Apple for its payments to music creators.

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Avatar for Chance Miller Chance Miller

Chance is an editor for the entire 9to5 network and covers the latest Apple news for 9to5Mac.

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