Apple Music contract: North American indies slam free trial terms

Last week saw uproar across the independent music community after details of a prospective Apple Music contract leaked – asking the indies to accept zero royalty payments for the service’s three-month free trial.

Independent label sources told MBW that these terms risked “punching a black hole in music industry income”, as consumers flocked to a trial that would see no recompense make its way back to non-major record companies and their artists.

Industry experts estimate that the worth of the three-month Customer Acquisition Cost to Apple is in the region of $4.4bn.

Now North American independent music industry groups have warned their members against signing the contract too readily.

US independent body A2IM – which represents labels such as Beggars Group, !K7, ATO and Glassnote – advised its members in a memo:

“It is surprising that Apple feels the need to give a free trial as Apple is a well-known entity, not a new entrant into the marketplace.

“Since a sizable percentage of Apple’s most voracious music consumers are likely to initiate their free trails at launch, we are struggling to understand why rights holders would authorize their content on the service before October 1.

“This is especially true in light of the potential revenue damage to a music label’s iTunes download revenues and impact on their cash flow. We will keep everyone informed as new details emerge in the press.

“In the meantime, please do not feel rushed to sign Apple’s current offer.

“We struggle to understand why rights-holders would authorise their content on Apple Music before October 1.”

“If you’d like to discuss generic deal structures, please feel free to reach out to us at A2IM.

“A2IM understands that each music label must determine for themselves their own promotional and commerce plans and that we respect our member labels’ independent entrepreneurial spirit.

“We simply suggest to our members that before agreeing to any direct licenses, that they should please consider all factors and their effects on their music label’s results, now and in the future, and make an educated decision.

“In accordance with the entrepreneurial spirit of our members who run their businesses, each of our members should continue to do what is in their business’s best interests knowing, whatever decision or statements they make, that every A2IM label member will always continue to get full A2IM support and benefits.”

A2IM wasn’t alone, either. The President of Canadian independent music representative CIMA, Stuart Johnston, issuing a public statement which castigated Apple for making the offer.

As you can read below, CIMA – the Canadian Independent Music Association – says it is tired of the music industry being “shafted” by technology companies, and speaks of its “shock” that Apple would make a royalty-free offer to the indies.

“Why is music still considered a free commodity?

“Why are artists still considered second-class citizens, and their music (their art; their craft; their livelihood) expected to be just given away?

“Why are commercial interests of corporations being built on the backs of our musical artists, without fair and due compensation to them?

“These questions are raised yet again, after it has been revealed that Apple will pay zero royalties (as in nothing, nada, zip) to our independent artists and their labels and publishers, when it launches its three-month trial period for its new streaming service, Apple Music.

“It is an outrage that any company, let alone Apple, will refuse to pay independent artists, the labels and the publishers supporting them.

“Is Apple refusing to pay its staff during this free trial period? Is it refusing to pay its many suppliers?

“Does Apple expect to get its marketing and promotion services for free – all for the reason that it will supposedly receive no revenues during this free trial period?

“Apple should know better… this is a shock and, quite frankly, a rip-off.”

“We think not. Apple should know better.

“It should be first in line to pay for the art on which its business model is based. It’s called the cost of doing business, folks, and it works very well in practically every other industry.

“Why then does the music industry get shafted?

“Music is a commodity, which has value on many different levels to be sure, not the least of which is monetary value. Artists should be paid for their work. Period. End of sentence. Aside from the creative blood, sweat and tears that an artist puts in to write and record a song, it takes real dollars to make it a reality and bring that music to market.

“Who else would work as hard as our artists and expect to do so for free? Certainly not Apple.

“So for Apple to refuse to pay artists for their work for this length of time is a shock, and is, quite frankly, a rip off to those artists and the companies that support them.

“The arrogance of any company to believe that its business model should be based on getting something for nothing – and exploiting that for its own mass profits – is shameful. Period.

“Apple is using its considerable weight to bully independent labels and their artists to sign a deal that will only benefit Apple – and not the hard working songwriters, recording artists and independent record labels that create music every day.

“This exploitation of our artists and the music industry in general must stop. And Apple should set the example here and do what is right – stop its shameful business practices and pay the artists and labels now!”

Over on MBW, the MD of one of the world’s leading independents, [PIAS]’s Edwin Schröter, has called for the indies to maintain optimism around a resolution with Apple and the future possibilities of Apple Music.Music Business Worldwide

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