Apple Music cautiously embraced by record industry

Wed Jun 10, 2015 4:50pm EDT
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By Julia Love and Mari Saito

SAN FRANCISCO (Reuters) - A decade ago, Apple Inc helped revitalize a music industry hit hard by online piracy with its iTunes Store. Now, amid a steady slump in digital downloads, the industry is hopeful that the tech giant's new streaming service will give record companies another desperately needed boost.

Apple Music, unveiled Monday and scheduled to launch at the end of the month, will offer subscribers access to a vast library of songs for $10 a month, but has no free on-demand tier unlike industry leader Spotify and others.

Officials in the recording industry are pleased to see Apple throwing its deep pockets and strong brand behind paid streaming, which generally provides more revenue for labels than the free services, which are supported by ads, said Cary Sherman, chairman and chief executive officer of the Recording Industry Association of America.

"We are very hopeful that Apple will not only succeed but that Apple's entry into the streaming business in a major way will actually be a shot in the arm for all streaming services," he said, helping them - and the record companies - make more money.

The trend toward streaming is clear: Paid subscriptions in the U.S. rose 26 percent year-over-year to 7.7 million in 2014, according to data from the RIAA.

But despite the generally positive reaction to Apple's announcement, some music companies are still concerned because of the tough economics of the streaming business, said Sherman. Premium subscriptions offer slightly better payouts to record labels and their artists than free services, but not as much as digital downloads.

Spotify's premium service, for example, generated revenue of less than $37 million in the United States in December 2014, according to an analysis conducted by Audiam, a New York-based firm that helps music companies collect digital royalties.

But Apple's sheer volume of existing users - roughly 800 million accounts on iTunes - could significantly increase the payoff for publishers, said Jeff Price, the CEO and founder of Audiam.   Continued...

Apple senior vice president of internet services and software Eddy Cue speaks at the Worldwide Developers Conference in San Francisco, California June 8, 2015.  REUTERS/Robert Galbraith