Apple's Deep Pockets Affecting Spotify Contract Renewals

Spotify-Apple-Music-logosSeveral of Spotify's contracts are up for renewal and the high rates Apple pays record labels are affecting Spotify's negotiations, reports MusicBusinessWorldwide. As it considers a future IPO, Spotify is aiming to strike long-term deals with record labels at lower rates, while labels want Spotify to pay as much as Apple does.

Spotify reportedly pays record labels 55 percent of its revenue, while Apple Music pays 58 percent (Apple is also said to pay more to publishers than Spotify does). Spotify was initially given a "marketing discount," but now record labels want Spotify to pay what Apple pays. Meanwhile, Spotify, in an effort to become profitable, wants to pay less.

The major labels, unimpressed with some of Spotify's recent spending decisions, believe that now's the time to up this figure. So where do they want to take it?

Well, it's common knowledge that Apple Music is paying 58% of revenue to labels - after users' free trial periods have finished. The majors want Spotify to move its revenue share up towards that point.

Loss-making Spotify, though, is attempting to push this revenue share down, say MBW's sources. Yup: that means paying labels and artists a smaller slice of the proceeds.

Spotify is arguing that Apple's revenue share rate only applies after a three-month free trial and that it simply doesn't have the spending power of Apple, Google, or Amazon, three of its main competitors all with deep pockets, large user bases, and other sources of revenue.

Negotiations remain "optimistic" according to MBW's sources, and the "likely outcome" is a licensing deal similar to the one Spotify has had for the last few years, but a deal has yet to be struck. Spotify is said to be considering "windowing" or making some new releases temporarily exclusive to paying customers as a way to lure labels into accepting a lower rate.

Spotify's contracts with Universal Music Group, Warner Music Group, and Sony Music Group are all expired, and while Spotify continues to license content on a month to month basis, the absence of a long-term plan could potentially affect the company's IPO plans. It is, however, said to be "out of the question" that the three major music labels will pull their content from Spotify.

Top Rated Comments

Cineplex Avatar
61 months ago
Apple will drive everyone out of business then abandon the music market.
Score: 41 Votes (Like | Disagree)
macduke Avatar
61 months ago
Apple will probably somehow be sued for this, even though they're paying the publishers more. It will be deemed "bad for the consumer" and the government will investigate it for being anti-trust since they have more negotiating power or some such B.S.
Score: 27 Votes (Like | Disagree)
Eorlas Avatar
61 months ago


Personally, if I subscribed to a music service, all else being equal if you told me that Service A gives more of my money to the artists than Service B, I'd choose Service A since they're giving more of my money to who I really want it to go to.
The article says Apple gives more to the label, not to the artist. It doesn't necessarily mean the artists get to see more out of this deal as their contracts are decided by the label in regards to how much they'll get per stream of their song.

I don't like the idea of Spotify being in some deep waters, because I feel their service is superior. Large library, they've been around for a while, and their app/interface is really easy to use. Apple's feels clunky and unintuitive, and it feels like the music experience as a whole on iOS 9/10 is not as enjoyable. Spotify's contrast within their app is really welcome on the eyes as well, since they don't have the same fetish for bright white's like Apple does in pretty much all of their stock app experiences.
Score: 17 Votes (Like | Disagree)
Chicane-UK Avatar
61 months ago
The reason i stopped using Spotify it's because Android users was also using it..so was no longer cool! I don't understand why Apple has released :apple: Music for Android? Droid users are having problems financially - money problems xD
:rolleyes:
Score: 15 Votes (Like | Disagree)
Makosuke Avatar
61 months ago
I can see how a record label intentionally wanting to prop up Spotify in order to maintain competition in the market might be willing to give them a better deal than Apple, but generally speaking, "Our competitor is giving you a higher percentage of their gross than we are, but we think we should pay you even less than we are now" is a really weak position to be negotiating from.

Especially since there is such a glut of alternatives out there. It's one thing to argue that you need a bigger cut because nobody can make money at your current rate; it's another entirely to argue that when others are already paying more than you are. That's pretty much just proof that you're either charging too little or doing it wrong.

Personally, if I subscribed to a music service, all else being equal if you told me that Service A gives more of my money to the artists than Service B, I'd choose Service A since they're giving more of my money to who I really want it to go to.
Score: 12 Votes (Like | Disagree)
spiderman0616 Avatar
61 months ago
Why not just set the price to be fixed for all business to operate at a certain level 55%.
It then comes down to customer experience, which one offers the better experience.
Because it's called a "Free Market".
Score: 11 Votes (Like | Disagree)

Top Stories

samsung experience 1

Samsung's 'iTest' Lets You Try a Galaxy Device on Your iPhone

Thursday April 8, 2021 12:42 pm PDT by
Samsung has launched "iTest," an interactive website experience that's designed to allow iPhone users to test out Android on a Galaxy device, or "sample the other side," as Samsung puts it. Subscribe to the MacRumors YouTube channel for more videos. The iTest website is being advertised in New Zealand, according to a MacRumors reader who came across the feature. Visiting the iTest website on...
sonny 2021 ipad mini pro dummies

Leaked Dummy Units Show iPad Mini 6 With Thick Bezels and Home Button, New iPad Pro Models

Thursday April 8, 2021 2:11 am PDT by
Rumors suggest Apple will release refreshed versions of the iPad mini and iPad Pro models in the first half of this year, potentially as soon as this month, and a new leak today has provided us with a possible preview of what to expect in terms of the devices' overall design and camera prospects. Tech leaker and Apple blogger Sonny Dickson this morning shared images on Twitter showing dummy ...
iMessage Android featured

Apple's Rationale for Not Bringing iMessage to Android Revealed in Legal Documents

Friday April 9, 2021 2:22 am PDT by
It's no secret that Apple sees iMessage as a big enough selling point to keep the service exclusive to Apple devices, however new court filings submitted by Epic Games in its ongoing lawsuit with the company reveal just how Apple executives have rationalized their decision not to develop a version of iMessage for Android. Apple clearly recognizes the power that iMessage has to keep users...
fake airpods 3

Counterfeit 'AirPods 3' Hit the Market Prior to Official Announcement

Friday April 9, 2021 2:45 am PDT by
Apple is expected to launch the third iteration of AirPods in the third quarter of this year. Rumors and reports suggest the new AirPods will feature an updated design more in line with the AirPods Pro, but lacking in "Pro" features such as active noise cancellation. Despite AirPods 3 not yet being officially announced by Apple, counterfeit products of the unreleased earbuds have already hit ...
nba tracking prompt orange

Two-Thirds of iPhone Users Expected to Block Ad Tracking

Friday April 9, 2021 7:19 am PDT by
As many as 68 percent of iPhone users are expected to deny advertisers permission to track them thanks to Apple's App Tracking Transparency feature, in what is beginning to look like a significant blow to the advertising industry (via AdWeek). With the launch of iOS 14.5, apps will have to receive explicit user permission before accessing an iPhone's advertising identifier or IDFA, which is...
iPhone 13 Battery Life Feature

DigiTimes: iPhone 13 Pro Models to Feature 120Hz ProMotion Refresh Rate and 15-20% Less Power Consumption

Friday April 9, 2021 12:52 am PDT by
The two premium "Pro" models of the upcoming iPhone 13 lineup will be equipped with a low-power LTPO display, enabling the iPhones to have a 120Hz refresh rate, according to industry sources cited by Taiwanese publication DigiTimes. According to today's paywalled report, Apple suppliers Samsung and LG Display are in the process of converting parts of their production capacity to produce LTPO ...
ipad pro and macbook pro

iPad and MacBook Production Reportedly Delayed Due to Global Chip Shortage

Thursday April 8, 2021 2:31 am PDT by
Apple is facing a global shortage of certain components for some of its MacBook and iPad models, causing the Cupertino tech giant and its suppliers to postpone production of the products, according to a new report from Nikkei Asia. According to the report, MacBook production is being hindered due to the shortage of chips mounted onto the circuit board before final assembly, which is a key...
ehric

iPhone 12 Mini Missing From Top 5 Best Selling Smartphone List of January 2021

Friday April 9, 2021 4:58 am PDT by
According to market data compiled by Counterpoint Research, Apple's smallest iPhone since the 2016 iPhone SE, the iPhone 12 mini, struggled to obtain a spot in the top five list of best-selling smartphones in January of this year. According to the market data, the iPhone 12 mini came in eighth place for the best-selling smartphone worldwide in the first month of the year. However, the iPhone ...
tmobile 5g modem

T-Mobile Launches Unlimited 5G Home Internet for $60/Month

Wednesday April 7, 2021 2:18 pm PDT by
T-Mobile today hosted an Un-carrier event where the company announced the launch of a a new 5G home internet plan, which is priced at $60 per month and offers unlimited data. The service is available to more than 30 million Americans across much of the United States, including 10 million households in rural areas not typically able to access reliable broadband. Connectivity will be either 4G ...
apple find my network

Apple Announces Find My Network With Support for Third-Party Devices

Wednesday April 7, 2021 10:06 am PDT by
Apple today announced the launch of its Find My network accessory program, which is designed to allow third-party Bluetooth devices to be tracked in the Find My app right alongside your Apple devices. According to Apple, the first accessory companies to take advantage of the new Find My integration include Belkin, Chipolo, and VanMoof, with devices set to be available beginning next week. ...