Based on an article published by Tim Ingham of Music Business Worldwide on June 21, 2017
For the past two years, Spotify was very aggressive about trying to negotiate the royalty rate it paid record labels down from 55% of revenue closer towards 50%.
After two years of negotiations, Spotify finally reached a new long-term licensing deal with Universal Music Group in April.
Universal agreed to a smaller revenue share – believed to be around 52% – but Spotify in turn agreed to be pegged to subscriber growth targets, as well as offering other benefits.
To put that into context, 1% of Spotify’s revenue last year equated to approximately $33m – so an industry-wide dip from a 55% to a 52% rev share would prospectively save Spotify somewhere near $100m annually.
According to a report from Bloomberg, the Cupertino giant’s long-term licensing deals with the labels for both Apple Music and iTunes are due to expire at the end of this month.
As part of the re-negotiations, Apple is apparently asking to bring its label revenue share rate down from 58% closer towards Spotify’s equivalent.
Bloomberg’s sources suggest that, like with the Spotify deals, labels are broadly open to the discussion with Apple – so long as the company commits to agreed subscriber growth targets, as well as continued promotion of iTunes in key download markets.
Both Warner and Sony are yet to sign new long-term licensing agreements with Spotify, but MBW’s sources suggest that hopes are high that a deal with at least one of the pair will be struck by the end of July.
Spotify announced last week that it now attracts over 140m monthly active users, around 53m of which are believed to be paying subscribers.
Apple announced earlier this month that it now has more than 27m subscribers on its platform.