In a new memo sent to partners today, the firm – whose label family includes XL, Matador, Rough Trade and 4AD – comments:
“We thought it was time to update you on the situation with Apple Music, following speculation in the press, some of it ill-informed.”
This likely refers to some media outrage over the 58% cut of royalties that Apple has said it will pay labels once the free trial is over.
In fact, when combined with money paid to publishers/songwriters, says Apple, this will amount to a 71.5%-73% royalty share for music rights-holders – higher even than Spotify, which typically pays out 70%.
“Apple have been a wonderful partner for the last decade, and we confidently trust they will continue to be so,” continues Beggars’ note.
From there, though, things become less positive.
Beggars says it is concerned not only with the impact of the Apple Music free trial, which begins on June 30, but also ‘commercial and practical aspects of Apple Connect’ – the area of Apple Music where artists can upload their own media and share it directly with fans.
“We have recently been in discussions with Apple Music about proposed terms for their new service,” says the Beggars memo.
“In many ways the deal structure is very progressive, but unfortunately it was created without reference to us, or as far as we know any independents, and as such unsurprisingly presents problems for us, and for our coming artist releases.
“We are naturally very concerned, especially for artists releasing new albums in the next three months.”
“We are naturally very concerned – especially for artists releasing new albums in the next three months – that all streaming on the new service will be unremunerated until the end of September.
“Whilst we understand the logic of their proposal and their aim to introduce a subscription-only service, we struggle to see why rights owners and artists should bear this aspect of Apple’s customer acquisition costs.
“And given the natural response of competing digital services to offer comparable terms, we fear that the free trial aspect, far from moving the industry away from freemium services – a model we support – is only resulting in taking the ‘mium’ out of freemium.
“We are also naturally concerned, as ever, as to whether we and you are being treated on a level playing field vis a vis the major labels and their artists.”
This comment refers to speculation amongst the independent community that the major labels are receiving monetary compensation from Apple for the use of their music during the three-month free trial – although this has not been verified.
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.
“We fear the free triAl aspect will only result in taking the ‘mium’ out of freemium.”
The Beggars memo then states: “Additionally, we have reservations about both commercial and practical aspects of the Artist Connect area.
“It is a mistake to treat these rights as royalty free, especially in the light of recent licenses with services like Soundcloud.”
In conclusion, Beggars confirms that it has not licensed Apple Music less than a fortnight away from launch – which could prospectively mean artists such as Adele will not be available on the service on day one.
However, the company says it remains optimistic of reaching a resolution… if Apple rectifies the financial hardship it may be about to inflict on indies.
“At the moment we do not have an agreement with Apple Music that would allow us to participate in the new service,” concludes the memo.
“However, we very much hope that the obstacles to agreement can be removed, for us and for independent Merlin-member labels as a whole, and that we will be able to fully support this potentially exciting new service in the coming days.”Music Business Worldwide