Apple must have thought this was going to be simple: deliver independent labels a contract three weeks before Apple Music‘s launch, just like it did with iTunes 12 years ago, and they would dutifully sign.
Yet as we stand, less than two weeks before Apple Music goes public, the indies stand united in refusing to sign the contract.
The crux of their anger is Apple’s decision to offer no royalty compensation for Apple Music’s three-month free trial.
Insider industry experts have told MBW that the ‘Customer Acquisition Cost’ value for Apple of the three-month free trial is likely to be in the region of $4.4bn.
Independents from the UK (AIM), US (A2IM), Canada (CIMA) and Australia (AIR) have hit back at Apple for its terms – and now indies from France and Germany have weighed in too.
Germany’s VUT, whose board includes the bosses of CitySlang, Cargo Records, Freibank and Rookie Records, has penned an open letter to Tim Cook and Eddy Cue at Apple, which you can read below.
Dear Tim Cook, dear Eddy Cue,
I am writing to you today regarding the terms of your new streaming service Apple music. We, the German Association of Independent Music Companies, represent 1,300 German music companies – labels, publishers, distributors, aggregators, self-marketing artists etc. Our members produce 35 % of the recorded music used in Germany. They embrace innovative ideas to connect with music fans and the long-term relationships to their artists are at the core of their businesses.
We always believed that Apple aims at reaching fair deals with all players and not just with the three remaining major labels. The terms of the contracts sent to independent labels unfortunately tell a different story. You want to make Apple Music THE platform for music lovers worldwide by bringing them “more music than ever with access to millions of songs”. In our opinion – and as other cases like Myspace have proven in the past – you won´t succeed if you don´t take the independent music companies on board.
Your plan not to compensate independent labels during the three-month trial period leads to the assumption that you don´t respect the music of independent artists or the work their partners do. It is obvious that this will reduce the overall income for independent artists and labels significantly at a time when many depend on every cent for survival.
“My guess is that without independent music, apple music actually might be quite boring.”
Your company is not a start-up, your company is the “first U.S. company to cross the $700 billion valuation mark” and the biggest digital music retailer, so we´d assume you´re definitively able to pay the independents and their artists. Your company wants to use the content independent artists and their partners created, which took hard work, money and time. My guess is that without this music Apple Music won´t be that interesting, actually it might be quite boring with just mainstream acts on board.
Independents shouldn´t be the ones paying for your customer acquisition and the risk of the launch of your service. Instead, you should pay all partners as you did in the past. Apple used to be a highly valued partner of independent music companies and we´d like to see this relationship continue.
This means it should go without saying that you pay for the music you´re using in your new service, starting the first day of its launch and not after a period of three months. Show the respect for the work of the artists and their partners you used to show in the past!
Apple Music can definitively become a great place for music but you should try to reach that aim WITH the independent artists and labels. To get the independents on board, offering a fair deal, fair compensation and a seat at the table is the basis.
Therefore, we´d really appreciate an explanation for Apple´s behaviour towards independent music companies and hope that Apple will rethink its contract terms. We´re ready to talk, so are many independents worldwide.
Jörg Heidemann, Secretary General, VUT
VUT wasn’t alone, however.
We write today to Apple leaders to express our deep dissatisfaction with the conditions of launch of their new global streaming music service.
The UPFI is a professional organisation representing the majority of producers and distributors of independent record labels.
In France, the independent labels have initiated 80% of new products albums in our territory and account for over 30% of records sold (37% in the digital domain).
We have always regarded Apple as an innovative brand in all areas, close to what the independent labels embodied.
We believe that the arrival of Apple Music is a “boost” the music streaming market, which has room for several players.
Unfortunately, the speed with which Apple has announced the launch of this new service and the lack of consultation from the independent sector regarding contractual terms that are proposed or imposed on them, makes us feel that Apple intends to impose its terms without the possibility of real negotiations.
“Apple must review the conditions of apple music and ensure that independent labels are not forced to bear the cost.”
This attitude is clearly likely to have serious adverse consequences for our members in the short term.
The most damaging decision for record labels is that of imposing a total lack of compensation for labels for a period of 3 months, corresponding to a free offer to customers of Apple Music.
By doing so, Apple may cause a loss of income which may be considerable for all labels whose activity is based on the release of new products – even more so when their economic balance depends on the success of a title or an album during the free period.
This attitude is all the more shocking as the record label community is essentially financing the marketing launch of Apple’s service.
Even Apple knows the difficulties of the music industry – and everyone knows the huge profits of Apple and its market value.
Apple can not ask record companies to assume the financing of the launch of this service. It risks aggravating the economic difficulties that many businesses go through.
Apple has for over 10 years a major partner for the music industry, but it is clear that trying to impose a contract of unacceptable conditions for all independent labels.
This risks undermining the spirit of cooperation which must prevail in our relations.
If, as they suggest, Apple has a deep respect for the music and artists, it must review the conditions of launch of Apple Music and ensure that independent labels are not forced to bear the financial cost.Music Business Worldwide