Negotiations between Apple and the three major labels for Apple’s upcoming streaming music service are down to the 11th hour, according to a Bloomberg report that also details why the two sides haven’t been able to reach a deal: The labels want a bigger share of the service’s revenue than they get from Spotify and other existing services.
Apple is expected to announce a Spotify-like music subscription service at its WorldWide Developer Conference in San Francisco Monday. The company reportedly still has to finalize its licensing agreements with Sony, Warner Music and the Universal Music Group. The labels are getting 55 percent of Spotify’s $10 monthly fee, but are pressing Apple to pay 60 percent, according to Bloomberg.
That rate increase is in part motivated by the desire to get more money from all subscription services; if Apple was to agree to pay more, then Spotify and others would have to follow suit the next time rights are up for renewal.
However, music labels may also be trying to prevent a repeat of what happened to them with iTunes. Back in 2003, Steve Jobs convinced labels to a $0.99 price for digital music downloads, which at the time was significantly below the cost per song charged by other services. Thanks in part to that price, Apple quickly became the biggest retailer of digital downloads, setting prices across the industry, and forcing labels into a singles business that fastened the demise of physical album sales.
That’s why labels rebuffed Apple’s attempts to launch a music subscription service priced below $10 a month this time around, and that’s likely also why negotiations are extending into the 11th hour.