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Apple Music Strikes New Deals With Major Record Labels

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Apple has struck new deals for songs from the world’s largest record labels, as the technology giant attempts to increase its media presence and siphon more people towards iPhones.

In recent months, the company sealed multi-year licensing deals with Universal Music, Sony Music and Warner Music, allowing for hits from artists spanning Taylor Swift, Lizzo and Adele to continue to be streamed on Apple Music.

Apple’s new contracts do not, however, include an economic agreement to bundle Apple Music with the company’s television service, indicating that a widely anticipated super-bundle of Apple’s media content may be months away.

The major music companies have risen thanks to the success of streaming services such as Apple Music and Spotify. Online streaming made up nearly 80 per cent of US music sales last year, according to the RIAA trade group. However, these music labels still wrangle with the streaming companies on how to split the riches. The two sides meet every few years to hash out new agreements, which renew the streamers’ rights to their songs and set royalty rates for the next few years. While these talks are often controversial between Spotify, Apple Music’s chief rival, and the music industry, Apple has for years placed itself as a more cooperative partner. Spotify remains locked in licensing talks with Universal Music and Warner Music, with the two record labels extending their existing agreements every month, as they continue high-stakes negotiations that have been underway for about a year. Spotify has a deal in place with Sony.

Music contributes to Apple’s services revenue, which the company has been on a mission to expand. Services – including the App Store, iCloud, Music and TV+ – made $46.3bn in revenues for Apple last year, up from less than $30bn in 2017.  Last year, analysts suggested that it would eventually create a mega-bundle to fold in apps such as Music, News+, which aggregates magazine and newspaper content, and Arcade, which offers more than 100 games for one monthly fee.

Apple has told the big music companies that it plans to aggregate its media services, but the two sides have not yet settled on the details of a media bundling plan. Apple Music said last summer that it had 60m subscribers, including customers who are using free trials. The Cupertino-based tech group outperforms rival Spotify in the US, where iPhones are dominant. This stronghold has helped fend off competition from Amazon, which has 55m users across all its music services, making it the third-largest paid music streamer behind Apple and Spotify. But outside the US, Amazon has been outpacing Apple, according to Midia Research estimates, with 5.2m subscribers in the UK, the world’s third-largest music market, as of last summer, versus Apple Music’s 4.7m.

The discussions come at a critical time for the music companies, as they look to cash in on the restoration in their business and tap investors for more significant valuations. Warner last month filed for an IPO, while Vivendi recently teased that Universal too would go public in the coming years.

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