Apple inching closer to inking licensing deals for clould-based music

Tue, May 24, 2011


By Luis Estrada:

Apple is inching closer and closer to securing a licensing deal with the four major record labels that would enable Apple to announce its rumored cloud music service in two weeks when WWDC kicks off on June 6.

The latest is that Apple has already secured deals with EMI Music, Warner Music, and Sony Music. Still waiting in the wings is a deal with Universal, the largest record company of the four. While music labels have been notoriously reluctant to cave to Apple’s demands in the wake of iTunes taking off the way it did, recent cloud-based music initiatives from both Google and Amazon (who haven’t struck licensing deals by the way) may prompt Universal to get on board sooner rather than later.

Still, CNET writes that there are hurdles remaining before the ink dries and a deal is finalized.

First, there’s only two weeks left before WWDC. That doesn’t leave a lot of time. Apple must negotiate with all the large music publishers individually instead of a single body, such as the National Music Publishers Association (NMPA), the publishers’ trade group. Here’s a good place to explain why Apple’s deals with the labels doesn’t mean the company has all the licenses it needs.

The labels own the recording rights but not the publishing rights. Let’s take for an example the longtime hit song “Twist and Shout.” If a digital retailer wants to sell The Beatles’ cover of that song, the merchant must pay EMI and Apple Corp. (the company that represents the band) for the sound recording of the Beatles performing that tune. The retailer would then have to pay whatever publishing company represents Phil Medley and Bert Russell, the men who wrote the song’s words and music, what is known as mechanical licensing fee. If the retailer wanted to sell the Isley Brothers’ version of “Twist and Shout,” Medley and Russell would collect again.

While the money that separates Apple and the publishers isn’t much, negotiations over these kinds licenses have a history of dragging on even under the best of circumstances, and these aren’t the best of circumstances.

Moreover, there are no guidelines as to how to license music via the cloud and there’s the never ending struggle between music publishers and labels as well who all want to wet their beak as much as possible.

Again, with Amazon and Google both rolling out cloud-based music services without licensing deals, the labels would like to see Apple set a strong precedent for licensing streaming music from the cloud to enhance their own negotiating position.

Apple’s history with the cloud has been anything but stellar (remember the MobileMe rollout a few years back?) but hopefully this time around they’ve learned from their mistakes and will announce an initiative that’s actually engaging, and above all, works.



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