
With regards to Apple Music - ascorbic
http://beggars.com/group/pressrelease/90/with-regards-to-apple-music
======
unfamiliar
>we struggle to see why rights owners and artists should bear this aspect of
Apple’s customer acquisition costs

This. If Apple wants to draw people to their music service with a free 3 month
trial, they should be ponying up the cash for those 3 months, or at least part
of it since this is ultimately a mutually beneficial arrangement. Expecting
labels to pay for the richest corporation on earth to attract people to its
new music service seems wrong.

The artists releasing things in this quarter are going to be the worst
affected. I know that I won't be purchasing any new music in the next 3
months.

~~~
escherize
I don't see how the amount of money Apple has in the bank matters here.

~~~
tragic
Apple is going up against well-entrenched incumbents. It would be a good idea
for it to use those cash reserves in order to carve out a space in streaming-
land, if that's something it wants to get into. See also: Microsoft and the
XBox - how many years was it before that broke even?

Throwing money at labels alienated from Spotify and co may or may not be a
good use of that money, but given the amount of griping going around, it could
be worth a shot. That's between the respective beancounters of Apple and the
labels.

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jnks
What's happening here is not a shift to net 90, and it's also not an attempt
by Apple to rip any rightsholders off.

Instead, it appears Apple and the major labels believe that three free months
of Apple Music threatens to hurt Spotify's userbase growth at a crucial time
for Spotify (fundraising pre-IPO). The industry has lost its faith in freemium
(Apple Music, trial aside, has no free tier) and either this will kill Spotify
or get them in line.

The indies, who overall can't afford losing three months of revenue, are just
caught in the cross fire.

~~~
maxerickson
_The indies, who overall can 't afford losing three months of revenue, are
just caught in the cross fire._

People keep saying this. Is there much evidence to support it? It's very
understandable that they don't want to forgo revenue, but that is not the same
as being unable to continue operating with the lower revenue.

~~~
jbigelow76
How about you forgo getting paid for your work for three months to help your
employer out? Will you die as a result, probably not, so we're all good right?

~~~
maxerickson
I think I wouldn't work for free.

I did say I understood why they do not want to do it, I'm still curious what
the actual impact on their revenues would be (or can we not talk about that
because the situation involves a bigger company that has lots of money?).

~~~
FireBeyond
The flip side is people are saying "Oh, but Apple will pay 1.5% more in
royalties".

Oh, good. It'll only take 66 months to recoup that after a three month trial.

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j42
Can anyone explain the intent here? It seems like a ridiculous decision by
Apple any way I look at it... and I'm an active opponent of the major labels &
right-holder organizations.

If Apple is trying to shift to a user-subscription model and pay the labels
(ultimately, artists) net-90, that's great, however it's obvious to anyone
who's run a bootstrapped business that an unforeseen, 90 day break in cash
flow can be an unrecoverable setback.

Not for big labels. They can weather the storm (though precedent dictates
they'll pass as much of this cost on to their artists as legally possible).

The financial situation of end content creators and smaller studios is far
more variable. Some will be fine. Others (especially those with content
scheduled for release within this 3-month window) could be completely
overwhelmed. This simply consolidates more market power into the hands of
currently-large labels, and generates ill will toward Apple elsewhere.

Why would a company that seems to _want_ to attract self-publishers into its
walled garden not find a structured solution to bridge the gap?

I'm all for forcing artists to stream their music (I'm looking at you, Taylor
Swift), because I see how that can ultimately make everyone more money.

Arbitrarily disrupting cash flow, though, in order to run an experiment and
offload your acquisition costs is a pretty offensive, and surprising move by a
company with hundreds of billions in fungible assets.

~~~
notsony
Hmm, why doesn't Apple charge musicians 30% like they charge developers?

~~~
muchcomment
There's a 30/70 split for most online music services (both streaming and
purchase). The major labels negotiate to get a better deal, but for most
artists there's a distribution fee of 30%. I don't have the details for the
Apple Music agreement, but I know both Spotify and Tidal takes a 30 % cut of
the revenue. I expect Apple Music to follow the same revenue split as iTunes.

Also: Spotify's freemium model pays out about 1/20 compared to Tidal premium-
only model. If Apple Music is a consumer success, it (and other premium-only
services) will be a much more attractive option for artists than Spotify.

------
IBM
This letter and other bleating from labels is just about trying to get a
better negotiating position. What this letter doesn't mention is that Apple is
offering a higher cut on an ongoing basis in exchange for the 3 month free
trial.

>Apple won’t pay music owners anything for the songs that are streamed during
Apple Music’s three-month trial period, a bone of contention with music labels
during negotiations for the new service. But Kondrk says Apple’s payouts are a
few percentage points higher than the industry standard, in part to account
for the lengthy trial period; most paid subscription services offer a free
one-month trial.

[http://recode.net/2015/06/15/heres-what-happens-to-
your-10-a...](http://recode.net/2015/06/15/heres-what-happens-to-
your-10-after-you-pay-for-a-month-of-apple-music/)

~~~
FireBeyond
The number I read was 1.5% more. Let's see some math:

Artist earns $100 in royalties per month from service. In three months, has
earned $300.

Artist earns $100 * 1.015 in royalties from Apple Music. In three months has
earned $304.50.

Artist loses $300 in royalties from 3 month trial. At new rate, it will take
(300/1.5 = 200) months to recoup the difference from the new royalty scheme to
get back the loss. Sounds like a fantastic deal for artists...

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rossng
Ouch - those are some pretty important artists for Apple to be missing out on.

~~~
Infernal
Not sure if sarcasm - if not, then I agree. If so, see their list of current
artists here on Wikipedia:

[https://en.wikipedia.org/wiki/Beggars_Group#Current_group_ar...](https://en.wikipedia.org/wiki/Beggars_Group#Current_group_artists)

~~~
rossng
Definitely not sarcasm - anyone who has an interest in music probably listens
to someone on one of their labels.

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serve_yay
> 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.

Wait, how does that work exactly?

(Though I agree with the point that they shouldn't have to bear Apple's
customer acquisition costs.)

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joshuapants
Looks like Beggars can be choosers after all

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eclipxe
Hmm. Apple prominently features FKA Twigs in Apple Music promotional material
(and in the keynote), but she is under Young Turks which is part of Beggars.
Wonder how that will play out..

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callumjones
Does this exclude them from Beats 1 as well? I haven't listened to Ebro or
Julie but I know there will definitely be music coming out via Beggars (XL &
Young Turks) that Zane Lowe will want to feature - I could see it really
pissing a DJ off if they can't play music like this just because their
employer can't get the licensing right.

~~~
k-mcgrady
Wouldn't Beats 1 just operate under the standard radio licensing agreements?

~~~
thirdsun
Likely, but the question is whether Apple/their DJs have an agenda to give
tracks not in their catalog less or no time on air.

~~~
k-mcgrady
Good point but I think that hurts Apple more than the artists. There are
plenty of more popular alternatives available - but Apple will fail if it's
missing too much content.

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dangoor
If there are enough artists that opt out because of the 3 month free trial,
then the 3 month trial will actually work against Apple here. You'd get a lot
of people trying the service out during the free trial and being frustrated at
the amount of music that's missing from the service.

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chaz72
Well, they don't have to sign then... Sign up after most people's three months
run out. Or negotiate for better terms. Or walk away from the table.

It's not like their fate is entirely in Apple's hands.

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gress
The free trial is limited to three months, so it's simply false to equate it
with 'free' or 'freemium'.

Apple _is_ asking labels to offer users access to their music for free during
the trial period. I.e. Apple isn't going to subsidize the music during the
trials.

The real question is - why is beggar's banquet afraid of giving their
listeners a 3 month free trial? Are they afraid that people won't want to
continue listening to their artists after that?

~~~
w4
> The real question is - why is beggar's banquet afraid of giving their
> listeners a 3 month free trial?

Why do you consider it reasonable for Apple to use artists' IP, free, in order
to acquire users for Apple's paid services?

EDIT: I also suspect that the free trial will create an _enormous_ cash flow
crunch for smaller labels when Apple Music releases. Consider the following:
Apple Music will become available, for free, to all existing iTunes users for
3 months. You can expect that iTunes music purchases will nosedive after Apple
Music's release, at least for those first months.

If you're a small indie label, it's likely that losing the lion's share of a
full _quarter_ of revenue from one of the largest music stores on earth (never
mind the ripple effects on other stores) is going to represent a significant
financial hardship. Hence their consternation over mandatory 3 month free
streaming.

~~~
gress
> Why do you consider it reasonable for Apple to use artists' IP, free, in
> order to acquire users for Apple's paid services?

I don't and that's a false statement about what's happening. When the free
trial ends, payments from the users are split with the artists. Both the
artists and Apple benefit from the success of the service.

You could equally well say - "why should artists expect to user Apple's IP to
market their music for free?"

~~~
w4
> You could equally well say - "why should artists expect to user Apple's IP
> to market their music for free?"

Except that they don't. Apple takes a cut of each payment just like it does on
the App Store.

"Artists using Apple's IP for free" is not what's going on here - Apple is
stating it will not pay artists in an effort to subsidize its user acquisition
efforts. If Apple were forgoing its portion of each subscription payment,
while still paying artists their portion, no one would be complaining.

Let's put it this way: tomorrow, Apple announces that it will be introducing
an "App Store Subscription." For $9.99/month users will receive unlimited
access to all apps on the App Store. Developers will receive a share of each
user's subscription payments in proportion to app usage. Apple simultaneously
announces a 3 month free trial for all App Store accounts, and states that it
will be making _no_ payments to developers during that trial since users are
not paying for it.

Do you feel that this is a fair arrangement?

