I.B. BAD DIVES INTO THE PREMIUM STREAM
THE PIED PIPER OF PREMIUM: The music industry has now firmly positioned itself behind the proposition that the premium subscription model is a sustainable road to success, while the free, ad-supported, unlimited streaming model is a losing proposition. Jimmy Iovine set the wheels in motion for this fundamental paradigm shift last year when he persuasively championed premium’s viability, first to Apple and subsequently to Lucian Grainge and Doug Morris. Iovine’s biggest challenge had been the initial step, getting Apple to buy in, given that the richest, most powerful company on the planet could certainly have afforded to go the other way and launch a free streaming service if it had been so inclined.
Having succeeded in selling his concept to the principals, Iovine now turns his attention to selling the Apple/Beats service to consumers, starting with the 850m already in the iTunes ecosystem. The new offering will be multi-tiered, insiders say, with the basic tier believed to be priced at $9.99 a month. Expect the high-profile marketing that has been a Beats signature since the company’s inception to be a crucial part of the upcoming iTunes/Beats play. Interestingly, Iovine borrowed this approach from none other than Steve Jobs, who masterfully employed artists in selling Apple products throughout the iTunes era.
The Iovine spin will be that artists are not being fairly compensated by freemium, while the new Apple/Beats entity will prioritize the needs of artists and rights owners. To that end, he’ll enlist superstar artists to help push the paid agenda, while Grainge and Morris remain vocal in holding the line in their support of premium. This offensive will force the Spotify and Google PR machines to try to counter with equally compelling spins of their own.
During those meetings between Iovine and various label honchos that took place at Iovine’s home during Grammy week, Apple’s new power player said that the iTunes streaming service would launch during the first half of the year and asked each exec what tentpole records were coming up. Clearly, Iovine wants to stay closely connected to the music business, thus enabling him to keep doing what he’s always done—corralling and harnessing top talent—albeit in a very different role.
Contrary to speculation, Iovine is said to not be looking to sign high-profile acts to record deals at this point, although Apple could certainly outbid the majors for talent if it chose to do so. Instead, he’ll focus on what’s known as windowing—getting exclusives for a certain period of time. The exclusive deals Iovine is expected to make loom as potential issues for the rights holders in terms of how said deals would impact their other digital and physical partners around the world. So it’s realistic to expect a balancing act between iTunes and the rights holders in the early stages.
If Iovine turns out to be right about his grand plan for the transformation of the music business, this achievement will be nothing less than the crown jewel of his considerable legacy.
DEAL TALK: One Direction is recording its fifth album in five years for SYCO. As X Factor alumni, 1D originally signed a typically onerous three-album, 360 deal, but subsequently negotiated a two-album extension. Were they able to get back some of their ancillary rights in the renegotiation? In any case, the upcoming album will fulfill the group’s obligation to Simon Cowell and Sonny Takhar’s label, a joint venture with Sony. This situation gives rise to the question, how sustainable is the long-term recording career of a boy band—even a ginormous one like 1D—in today’s climate?
In other contractual intrigue, which high-profile UMG and Sony executives who signed three-year contracts with $1m annual guarantees in late 2012 and early 2013 are nearing the ends of their current deals?
FACE-OFF: A big move is rumored to be in the works, with all three U.K. majors joining forces in opposition to Ashley Tabor’s wildly successful Capital FM, Britain’s leading commercial Top 40 station, on the issue of day and date. Capital FM has long demanded exclusive tracks from high-end acts before they go to iTunes, Spotify or any other streaming service, and has been known to penalize those labels that refuse to play along by dropping their records from the station’s playlist. The majors are reportedly planning to push back by refusing to give Capital FM those exclusives. Expect Capital FM not to roll over but to push back hard against the majors’ joint offensive.
TEA TIME: With two months in the books, Republic and Columbia are locked in a battle for first place in TEA marketshare with 11% apiece. Capitol Music Group (7.4%) is next, followed closely by Interscope Geffen A&M (7.1%) and RCA (6.6%), both of which are back on cycle following relatively quiet years.
NAMES IN THE RUMOR MILL: Len Blavatnik, Robert Kondrk, Daniel Ek, Richard Griffiths, Max Lousada, George Ergatoudis and Tom Poleman.
