Apple Signs Independent Labels in Licensing Deal

The turning point in Apple's talks with the music industry came late Sunday night, when - after a rebuke from Taylor Swift - the company reversed course on a proposal to not pay royalties during test drives of a new streaming music service.

But for thousands of small record companies for whom Apple is a crucial source of income, a crisis had already been in effect for two weeks, and was resolved only late Tuesday, when the independent groups agreed to licensing terms with the tech giant.

"Over the last few days, we have had increasingly fruitful discussions with Apple," Martin Mills, the founder of Beggars Group, whose acts include Adele and Vampire Weekend, said in a statement Wednesday. "We are now delighted to say that we are happy to endorse the deal with Apple Music as it now stands, and look forward to being a big part of a very exciting future."

The deal, which was also endorsed by Merlin, an organization that represents small labels in digital negotiations, will let thousands of labels join the new streaming service, Apple Music, which will open around the world next week. The new service is Apple's long-awaited entry to the world of on-demand streaming music, and will include $10-a-month subscription plans to rival Spotify and others.

Apple did not respond to a request for comment Wednesday about the indie deals, and representatives of Beggars, Merlin and other independents declined to comment further.

The standoff with Apple illustrates the unusual position of independents in the digital age. They may have some of the biggest artists in the world - Swift and Adele are both signed to indies - but small companies struggle to secure licensing deals on the same terms as the big labels. Last year, for example, independents spoke out against YouTube over terms they believed were unfair.

As executives at both major and independent labels describe it, the situation behind the scenes with Apple was typical when it comes to working out the complex licensing contracts for digital music.

In the months before Apple announced Apple Music at an event in San Francisco on June 8, the company had extensive talks with Universal, Sony and Warner, the three major labels, and struck the first of its deals with those labels only days before the announcement.

But independents were not sent proposals by Apple until the day of the event, and they were told they had five days to approve them with no possibility of negotiation, according to two executives with knowledge of the talks.

Apple had proposed raising its royalty rate slightly for paid streams - to 71.5 percent of revenue, from 70 percent - to make up for the loss of royalties during the trial period. Apple would still pay for downloads, but those would be competing with the free trials of the streaming feature, executives said, and many labels were upset by the prospect of three months of reduced income from the industry's biggest retailer.

Many independents complained to Apple privately, and trade groups around the world spoke out in frustration. But a stalemate persisted until Sunday morning, when Swift published her blog post and immediately put Apple on the defensive.

By Monday - just hours after the company announced its policy change - Apple executives began negotiations in New York with a number of independent labels, including Beggars. By Tuesday afternoon, Apple furnished a new proposal that paid royalties on the free streams, and addressed other concerns like the policing of content uploaded by artists to its new media platform, Connect.

For each song that is streamed free, Apple will pay 0.2 cent for the use of recordings, a rate that music executives said was roughly comparable to the free tiers from services like Spotify. This rate does not include a smaller payment for songwriting rights that goes to music publishers; Apple is still negotiating with many publishers over those terms, several publishing companies confirmed Wednesday.

According to the music executives, these rates would apply to all labels.

For independents, the negotiations with Apple are seen as a victory, allowing thousands of small labels to be part of Apple Music and earn money when people listen to their songs.

But a lingering issue is how much credit goes to Swift. Without her involvement, some executives said, a deal would most likely not have been reached so quickly.

Others, like Adrian Pope, managing director of the British label PIAS, insisted that her involvement only finished what others had already begun.

"Despite what one might read," Pope said, in a statement quoted by the music website The Quietus, "this was not entirely down to Taylor Swift."

© 2015 New York Times News Service