Apple reportedly pays $100 million to music companies

Jun 3, 2011
Music

Apple reportedly has cut a deal with the largest of the four major music companies, securing the rights to its songs for Apple’s coming iCloud music streaming service. According to a story from CNet, making a deal with Universal Music was the last of the obstacles Apple (AAPL) needed to clear for iCloud, and it […]

Apple reportedly has cut a deal with the largest of the four major music companies, securing the rights to its songs for Apple’s coming iCloud music streaming service.

According to a story from CNet, making a deal with Universal Music was the last of the obstacles Apple (AAPL) needed to clear for iCloud, and it can now offer music on the service from all four of the companies. A separate story from The New York Post states that sources claim Apple will make somewhere between $100 and $150 million in advance payments to the music companies as part of the deal. That shakes out to $25 million to $50 million for each company as an incentive to get them on-board with iCloud before it is released.

Apple is set to announce the details of its iCloud service on Monday at its Worldwide Developers Conference in San Francisco. So far, the company hasn’t released any details – including remaining mum on whether a music service is part of the iCloud deal – but it has become common knowledge that Apple managers have been negotiating with music companies and attempting to bring a music-streaming component to the company’s services. Two major Apple rivals, Google (GOOG) and Amazon (AMZN), also just released streaming music services, and neither sought the approval of the music companies.

CNet’s sources had few details about the music company deals, but those anonymous sources did explain the revenue split for iCloud: 58 percent will go to the labels and another 12 percent to music publishers. Apple gets the remaining 30 percent – its standard rate, it seems. The New York Post writes that Apple is considering a $25-per-year subscription fee, with an initial free offering to customers who purchased their music through iTunes (not unlike Amazon’s current freebie model).

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According to CNet’s sources, streaming won’t be available on Monday when iCloud is announced, but will drop “soon” (The New York Post puts the service’s start date in September). It also says that iCloud will include a “digital locker” service that will allow users to upload their music tracks to Apple’s cloud servers to be streamed from anywhere, but the locker will only be available for music purchased on iTunes, which sounds like a compromise worked out with the music companies. From what we’re hearing, with other tracks, iCloud will mirror them on its servers; the service will scan users’ music libraries and then allow them to stream Apple’s versions of files they’ve already purchased.

The New York Times is reporting that Apple has reached solid deals with Universal and with Sony (SNE), the two largest record companies, while negotiations with EMI and Warner/Chappell are still taking place. More licensing deals still have to be made, but it appears that the major hurdles for iCloud are being cleared just in time for Apple CEO Steve Jobs’ big announcement next week.

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Phil Hornshaw

Phil Hornshaw is a freelance writer, editor and author living in Los Angeles, dividing his time between playing video games, playing video games on his cell phone, and writing about playing video games. He’s also the co-author of So You Created a Wormhole: The Time Traveler’s Guide to Time Travel, which attempts to mix time travel pop culture with some semblance of science, as well as tips on the appropriate means of riding dinosaurs. Check out his profile.

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