Record Companies Are Rethinking Exclusive Streaming Deals With Tidal And Apple
The music industry is in trouble. It has been for a long time because people simply aren’’t buying music like they used to. In fact, according to the International Federation of the Phonographic Industry, music sales were just below $15 billion in 2014–a major drop from $40 billion in sales in 1998.
Obviously record companies are looking for ways to cut costs and increase revenue, and in doing do they’ve found restricting sought-after albums to one digital streaming platform is actually costing them money rather than making any. “The music companies now realize that restricting desirable albums to one online service could limit the overall growth of subscription music—viewed by labels as key to their own long-term survival. In their place, streaming-music services are scrambling to hire well-connected ‘ambassadors’ who can help them line up artists to make playlists, videos and other promotional materials to differentiate themselves,” reported The Wall Street Journal.
Normally subscription-streaming services like Tidal and Apple Music pay a fee to record labels for the exclusive rights to music from a range of artists. “The deal terms vary but usually include a modest upfront fee and, more significantly, promises of millions of dollars of marketing via advertisements on the streaming service, TV or billboards,” reported WSJ.
It’s not that subscription-streaming services don’t make money themselves. They actually racked in $2 billion last year for the $15 billion global record business. But “some major record-label executives now fret that limiting new releases to one service—even for a week or two—could be costing them, despite the support they get for the exclusive deals,” WSJ reported. So while these deals may be good for Apple and Tidal, record companies are worried that they are losing out on consumers who are not using these services and might be so confused and frustrated by these exclusivity deals that they are totally turned off to buying.
Artists, however, seem to lean toward exclusive deals. Take Frank Ocean for instance who released his latest album, “Blonde,” exclusively on Apple Music through his own independent label. Had Ocean still been with Universal Records, the recording company probably wouldn’t have gone this route. “Depending on the artist, even one week on a single streaming service alone could be costly…especially given that CDs remain the predominant format in some of the world’s top music markets, such as Japan, Germany and France,” reported WSJ. But it worked for Ocean, whose album sold nearly 300,000 copies in the U.S. during its first week on Apple.