Record Labels Not Sold On Apple’s Super-Bundle Subscription Idea

Apple has kicked off early talks with record labels about bundling its upcoming streaming TV service with Apple Music, its streaming music service, the Financial Times reported on Monday (Oct. 7).

Apple is hoping to create a super-bundle of media and music for one flat monthly fee, a move that is making some record labels apprehensive.

Record labels and Apple executives haven’t talked about a pricing model and discussions are still in early stages, people familiar with the negotiations told FT.

The tech giant included 12 months of Apple TV+ with the purchase of iPhones, iPads and Macs, a tactic that Bernstein analyst Toni Sacconaghi called a “genius” incentive. “The upshot is that by the end of 2020 [or] early 2021, Apple could accumulate millions or tens of millions of paying subscribers,” Sacconaghi said in a statement to the news outlet.

Music business executives have qualms that bundled subscription pricing will further cut into profit margins. Record executives have said, however, that negotiations with Apple are relatively friendly since the tech company traditionally pays a higher royalty rate than Swedish competitor Spotify.

The Apple TV streaming video service is expected to launch Nov. 1 at a starting price of $5 a month. Apple’s new television service will also offer Apple Channels that will allow users to watch premium TV channels like HBO, Starz and Showtime without a third-party app.

Netflix and Hulu have not signed on, perhaps due to Apple’s take of 30 percent on every customer who subscribes — a significant increase from the 15 percent it currently takes from customers that sign up to streaming apps through the App Store.

The service will allow customers in upward of 100 countries to access premium channels. However, each channel needs to be paid for separately, and all of them together would cost about $97 a month.

The new service is separate from the Apple TV+ initiative, which will include original programming from the company.