Since announcing its music streaming service Apple Music last week, technology giant Apple has struggled to convince independent labels of the need for the service’s free three-month trial period, which will see no royalties paid to rights holders during those three months.
Now, the Australian Independent Record Labels Association (AIR) has criticised Apple for expecting indies to “shoulder the financial burden” of the trial period, and has deemed the trial a “major problem”.
AIR has told its members in a statement that it does not endorse Apple Music’s proposed agreement. In a letter to AIR members, AIM CEO Alison Wenham, has said, “We are not satisfied that the deal being offered under this new initiative is fair or equitable to independent music companies.
“The speed at which Apple has introduced their plans and its lack of consultation with the independent music sector over deal terms has left us with the uneasy feeling that independents are being railroaded into an agreement that could have serious short-term consequences for our members’ interests.”
Wenham has also said that Apple Music’s free trial period has the potential to “cannabalize not only download sales, which remain a very important revenue stream, but also streaming income from other services”, and said that AIR cannot endorse Apple’s proposed agreement. Her letter is available in full, below.
As Rolling Stone notes, it’s not only Australian indies who are hesitant about Apple Music’s three-month free trial. A source at a top indie label has told the publication, “There definitely seems to be a coalescing of opinions to opt out.”
Other sources have said that Apple is refusing to negotiate on its Apple Music trial period in the lead-up to the launch of the service on 30th June.
Apple Music was announced at Apple’s 2015 Worldwide Developers Conference earlier this month, and will cost USD$9.99 a month in the US. Australian pricing is yet to be announced.
UPDATE 22/06/15: Apple has agreed to pay royalties during Apple Music’s three-month free trial period, with an Apple executive directly addressing Taylor Swift and other artists who disagreed with its original plans.
Watch: Apple Music Promo Video
AIM CEO Alison Wenham’s Letter To Members (Via Complete Music Update)
Having now had over a week to reflect on the launch of Apple Music we are not satisfied that the deal being offered under this new initiative is fair or equitable to independent music companies.
Clearly there is great potential for this new service and the global reach that Apple can offer should, in time, help further develop existing streaming markets and open up new ones around the world. It could be a game-changing moment for the industry.
However, the speed at which Apple has introduced their plans and its lack of consultation with the independent music sector over deal terms (despite what Jimmy Iovine might claim) has left us with the uneasy feeling that independents are being railroaded into an agreement that could have serious short-term consequences for our members’ interests.
The main sticking point is Apple’s decision to allow a royalty free, 3-month trial period to all new subscribers. This means that no royalties will be paid through to rights holders during that 3-month period.
This is a major problem for any label that relies on new releases rather than deep catalogue as the potential for this free trial to cannabalize not only download sales, which remain a very important revenue stream, but also streaming income from other services, is enormous.
As a whole the independent sector is a powerful voice in the music industry but its individual parts, the smaller labels particularly, cannot withstand such a potentially catastrophic drop in revenue.
Essentially Apple is asking the independent music sector to hedge its risk, to fund their customer acquisition programme and to shoulder the financial burden for their global launch.
Apple has always been a valued partner to the music industry but this decision to withhold income from the independent music sector is against the spirit of collaboration that we have come to expect from them.
Each individual member of AIM must, of course, make their own decision whether or not to sign this agreement, but many members have already expressed very real concerns about the consequences of doing so, hence our communication to the whole membership.
It is AIM’s view therefore that, in its present form, this agreement sadly does not meet a standard of commercial fairness that we can endorse.