Independent labels: We won't pay for the launch of Apple Music

Tim cookREUTERS/Lucy NicholsonApple CEO Tim Cook speaks at the WSJD Live conference in Laguna Beach, California October 27, 2014.

Independent record labels are concerned that by giving away their music for free during Apple Music’s three month free trial, they will essentially be footing the bill for Apple’s customer acquisition costs.

Beggars Group, the parent of a group of legendary independent labels such as 4AD and Matador, has been in discussion with Apple over the launch of its new music streaming service, and isn’t happy with the deal the company is offering independent artists.

In a blog post published on its site for the attention of artists and managers under the group, the company said it could not come to an agreement with Apple.

Beggars Group is arguably the largest and most influential independent group of labels in Europe. Matador Records, 4AD, Rough Trade Records and XL Recordings are four main labels that help make it up.

The post said: “In many ways the deal structure is very progressive, but unfortunately it was created without reference to us, or as far as we know any independents, and as such unsurprisingly presents problems for us, and for our coming artist releases.”

The group’s main problem is with the three-month free trial Apple is offering to users when it launches on June 30. During that time, artists won’t be paid anything when their music is played on the platform.

This could cause problems for artists that are releasing new albums between July and September, when Apple will start to pay artists from the £9.99 monthly fee users will pay, the group argued. Artists will miss out on essential revenue from those new releases, because they will be forced into giving their work away for free for three whole months.

“Whilst we understand the logic of their proposal and their aim to introduce a subscription-only service, we struggle to see why rights owners and artists should bear this aspect of Apple’s customer acquisition costs,” the group continued.

“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.”

The group also raised concerns over whether independent artists and the labels that represent them are being given the same deal as major labels and their artists, adding that it hoped Apple would make changes to the terms of its new service.

Apple has been trying to position its new, paid streaming services as a “friend” to artists, no matter how small.

But Andy Heath, the chairman of industry lobby group UK Music, told The Telegraph earlier this week that, to his knowledge, no independent British labels have agreed to allow their music to be used in the three month free trial.

He said: “If you are running a small label on tight margins you literally can’t afford to do this free trial business.”

The fear is that stream revenue those labels would have earned from Spotify will dry up as people check out Apple’s three-month free trial.

Once the trial is over, Apple says it will be paying more than the industry average of 70% of music streaming revenues to music owners. In the US this will come to 71.5%, and outside the US it will average out to around 73%.

But this hasn’t been enough to reassure independent labels in the UK.

These labels are happy to stick with Spotify, Heath said, which continues to pay them for each track played, even if Apple is promising to give them more than the industry average at a later date.

The Telegraph report added that two record label bosses had confirmed Heath’s view, but did not want to be named because talks with Apple are still ongoing.

In the face of spreading dissent, Apple is apparently playing hardball with artists. Brian Jonestown Massacre frontman Anton Newcombe claims that the company is threatening to pull his entire back catalogue from iTunes if he doesn’t agree to forgo royalties during a three-month trial period Apple is due to offer consumers, Consequence of Sound reports.

It isn’t just small labels and independent artists that aren’t happy with Apple Music’s terms. Taylor Swift has also snubbed the new service, and won’t be putting her new album on the platform.

NOW WATCH: Two models in Russia just posed with a 1,400-pound bear

NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at