Apple Signs Music Deal With Warner
Apple has signed a deal with Warner Music Group, one of the most renowned music labels, to offer subscribers on-demand music via both iTunes and Apple Music.
The tech giant has secured a deal for songs from Warner, the company’s first agreement with a major label since introducing its on-demand music service two years ago, according to people familiar with the matter.
Warner will provide Apple a catalog spanning Ed Sheeran, the Red Hot Chili Peppers and Bruno Mars for both iTunes, the online store, and Apple Music, the streaming service.
Meanwhile, Apple will pay record labels a smaller percentage of sales from Apple Music subscribers than it did under its first deal for the streaming service.
Music labels have long had a contentious relationship with digital marketplace owners that offer streaming and download purchases to customers. Physical media, like CDs, generated far more in revenue for the labels, and the turn to digital squeezed revenue and their bottom line.
Apple has been among the most preferred digital marketplace partners because the company doesn't offer free streaming services and requires customers to either purchase songs or sign up for its $9.99-a-month Apple Music streaming service to access content.
Large technology companies and music rights holders are establishing a framework this year for how to share proceeds from on-demand streaming, now the dominant source of sales for the record business in the U.S.
Music rights holders are willing to accept a marginally smaller share of the sales from on-demand services, provided those services continue to sign up paying subscribers at a higher rate.
Paid streaming was still a new business when the company signed its initial deal, and it was willing to lose a little more money because the service was intended to boost sales of the iPhone.
Once the leading player in online music, Apple was also eager to get a service on the market that could compete with growing rivals Spotify Ltd. and Google’s YouTube.
Apple pushed for a rate cut in this new round of talks after Spotify, the world’s largest paid music service, secured a rate reduction earlier this year. Apple has been paying labels 58 percent of sales, a higher rate than Spotify pays.
Apple also traditionally granted publishers a higher rate than its Swedish rival. Apple is now considering giving labels a cut of 55 percent, which would decrease if subscriber numbers met targets.
Moreover, Sony Music Entertainment, owner of the second-largest record label, is also on the verge of a deal with Apple, one of the people said. A deal between Apple and Universal Music Group, owner of the top label, is further off.