Since launching Apple Music last summer, Apple Inc. has shelled out some of its massive cash reserves to the music industry’s biggest and brightest stars, landing exclusive album releases on the streaming service.
But now there is a brewing backlash to Apple’s strategy. Earlier this week, Universal Music Group and its labels reportedly said, “No more,” and there are claims Spotify is making artists who take Apple’s cash pay when the exclusive window ends.
The change was sparked by the release of Frank Ocean’s highly-anticipated second studio album, “Blond.” Ocean, until recently, was a UMG artist through its Def Jam label. Billboard reported that Ocean, in order to fulfill his contractual requirements to Def Jam and UMG, released a visual album titled “Endless” before dropping “Blond” under an independent imprint. Both are streaming exclusively on Apple Music.
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Apple’s AAPL, -0.59% music streaming service, which has signed up 15 million subscribers after a year on the market, adds Ocean and his first album since his Grammy-winning 2012 debut album “Channel Orange,” to a list of exclusives that has included music from Drake and Taylor Swift. Drake released one of the top-selling albums of the year on Apple Music in a deal that may have reached $19 million, according to The New York Post.
Apple is willing to shell out big bucks, along with helping artists with expensive music videos or other perks, because it has billions in the bank and is willing to spend it to rope people into its $9.99-a-month music streaming subscription plan. With sales of iPhones stagnating, Chief Executive Tim Cook has focused on software and services as a growth engine for the world’s most valuable company, so he seems willing to shell out to pad the subscriber numbers.
UMG, which is owned by French company Vivendi VIV, -1.73% and Apple did not immediately respond to requests for comment.
Apple isn’t the only music streaming service using exclusive access to high-profile artists as a means to intensify competition with the likes of Spotify. Tidal infamously built its entire business around exclusive content, after Jay Z bought the streaming service from Sweden-based technology company Aspiro. Tidal boasts exclusive music and videos—either in part or entire catalogues—from Jay Z, Beyoncé, Kanye West, Rihanna and Prince.
Check out: Jay Z is suing the former owners of Tidal
Spotify has refused to play the same game and has been fighting back against these exclusive offerings. The music streaming giant has made it harder to find music from some artists who give Apple exclusive access when it becomes available on the service, according to a Bloomberg report. The report, which a Spotify spokeswoman said is “unequivocally false,” claims Spotify keeps songs out of its featured playlists and even buries songs in search rankings.
Spotify has faced vitriol from labels and artists for continuing to offer a free version of its streaming service, which it says helps fight piracy of music. That argument could be proving true, as reports indicate that albums that have debuted exclusively on Apple Music or Tidal have faced massive waves of piracy, including more than 750,000 illegal downloads of Ocean’s new album in less than a week.
The fight is especially important for Spotify, which is seeking new long-term deals with labels amid increasing losses, according to The Wall Street Journal, with an initial public offering likely on the way. And other rivals are waiting in the wings, with Pandora Media Inc. P, -0.70% expected to launch its Rdio-fueled streaming service very soon.
Spotify’s practices, coupled with UMG’s apparent new policy on offering exclusive releases, could threaten Apple’s ability to net those exclusives in the future. That, however, could take more time than Spotify has right now.
Source: Jay Z