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Apple has reached a new agreement with Warner Music Group that will see the tech giant pay out a smaller percentage of Apple Music revenue than it did when the service launched in 2015.
Citing sources familiar with the matter, Bloomberg reports Apple's renewed arrangement with Warner Music Group comes as technology companies and major record labels spar over licensing fees. With existing contracts soon to expire, Apple is looking to pay Warner, and perhaps other record labels, a smaller percentage of Apple Music sales as the service grows out its customer base.
With a boom in on-demand music, music rights holders are amenable to receiving lower rates so long as services like Apple Music continue to sign up subscribers, the report said. Currently, Apple pays labels 58 percent of sales, a rate the company is looking to drop to 55 percent this year. That figure could see further reductions if subscriber uptake continues at a rapid pace, the report said.
Apple's new deal was in part helped along by market competitor Spotify. The segment leader earlier this year secured a rate reduction from Warner Music Group, down from 55 percent to about 52 percent, dependent on subscriber performance. Warner also struck a long-term deal with YouTube, presumably involving streaming rate cuts.
Alongside the Warner deal, Apple is also on the cusp of inking a similar arrangement with Sony Music Entertainment, the report said.
Buoyed by a surging streaming market, Apple and other service providers have earned leverage in negotiations with major labels like Warner and Sony. Still, Universal Music Group, owner of the world's top label, is still reluctant to cede ground on the issue, and a rate reduction deal with Apple is unlikely to surface anytime soon.