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Apple hunting after lower royalties for Apple Music & iTunes content

By Roger Fingas

Apple is reportedly in negotiations to reduce the royalties it pays for content on Apple Music and the iTunes Store -- specifically, trying to bring amounts closer to what rival Spotify pays.

Apple's current deals with record labels expire at the end of June, Bloomberg sources said on Wednesday. The people noted, however, that rather than being a hard cutoff, associated parties will likely extend the deadline until an agreement is reached.

To date, labels have allegedly been taking a 58 percent cut from Apple Music subscriptions, a figure higher than most major services. Spotify, though, recently managed to lower its equivalent rate from 55 to 52 percent, with the tradeoff that it has to hit specific targets for subscriber growth. Apple is pursuing the same kind of deal, the sources said.

The labels have meanwhile asked Apple to commit to promoting iTunes in markets where streaming is less prevalent, such as Germany and Japan. In the U.S., music download sales have fallen in the past few years to 24 percent -- likely owing to faster internet connections, and the potential savings of streaming. While a Spotify or Apple Music subscription typically costs $9.99 per month, that money would buy just a single album on iTunes.

Apple is said to have offered high Apple Music royalties as a way of luring in labels who were worried the service would bite too deeply into iTunes. With 27 million subscribers, the company may now feel more comfortable about asking for concessions.

Initially Apple even planned to skip paying royalties from listeners' free trials, but backed off after an open letter by pop star Taylor Swift.

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