Apple Music has created a $50 million advance fund to help provide cash flow to indie labels and distributors who are facing challenges as a result of the COVID-19 shutdown.
Extra one-off advances – recoupable out of future royalties – will be available to labels and distributors that earn over $10,000 in quarterly revenue from the Apple streaming service and which have a direct relationship with the company.
Commenting on the scheme, the boss of the digital rights agency for the indie sector, Merlin CEO Jeremy Sirota, told Billboard: “Over the past week, I have had a number of conversations with Apple, who are aware of the challenges currently facing independents, about different ways they can support the community”.
“Coming out of those conversations, we greatly welcome the news that Apple has made a $50 million advance fund available for independent labels and distributors”, he went on. “The advance is optional, which gives our members and other independents the flexibility to decide if they want to draw on it”.
Although Merlin negotiates template deals with most streaming services on behalf of its indie label and distributor members, there isn’t actually a Merlin deal with Apple Music, because the tech giant’s original licensing agreements for iTunes (that were then updated to include Apple Music) pre-date the creation of the digital rights agency. Nevertheless, Merlin still talks to Apple on behalf of the indie label community.
According to Rolling Stone, an email to qualifying labels announcing the advance scheme states: “These are difficult times for the music industry globally. Livelihoods are at risk, with multiple sources of income that our industry relies on vanishing overnight. Apple has a deep, decades-long history with music, and we are proud to be in close partnership with the best labels and artists in the world. We want to help”.
The record industry is shielded from the negative impact of the COVID-19 crisis to an extent because of the way the streaming business works.
Overall income isn’t linked to consumption levels but to how many people pay to subscribe to services like Apple Music and Spotify. Meaning that – unlike with discs and downloads – the industry’s core revenue stream isn’t so swayed by each label’s ability to release and promote new music or each customer’s ability to buy that new music. Therefore it’s much easier for the record industry to weather this storm than it is for the live sector.
But that’s not to say that the record industry isn’t impacted at all.
The advertising sector is wobbling, which could impact monies generated on the free streaming services. For some labels, physical sales are still a key part of the mix and the shutdown of the high street will likely hit that revenue stream.
Royalties due from when music is played in a public space or synced into movies and ads will also likely take a hit (though the music publishers rely on those revenue streams much more than the labels do). And some record companies still share in an artist’s live income through the multi-revenue stream deals that became common in the late 2000s.
Though probably most importantly of all, some artists aren’t able or don’t want to release new music during the pandemic, and for smaller labels with smaller catalogues regular new releases may be required to ensure they get a decently sized share of the streaming pie.
And for smaller companies there is less contingency in the budgets when projects get pushed back and extra costs are incurred. Plus, many labels will feel the need to support their artists through that process, possibly financially.
All of which means any gestures by the streaming platforms to free up some cash flow in the short term will be appreciated. Though free cash flow isn’t free cash, of course, meaning that any benefit a label gets now from a nice advance will likely result in a dip in streaming income down the line.
However, if it stops a label from having to spend money to borrow money – or, for smaller labels, from going out of business because of an inability to borrow money – well that’s obviously a very good thing.