Apple strikes music deal with Warner Music, eying Sony move

Apple Music has struck a deal with Warner Music for iTunes and its two-year old streaming service, Apple Music.

It is its first with a major label, with speculation that it soon plans to enter a similar deal with Sony Music Entertainment.

Apple’s strategy is to follow Spotify’s lead in profit-sharing with record companies in return for a lesser 55% royalty rate (from 58%) and a promise to increase its subscriber base from its current 27 million (as of June).

Apple’s initial entry into music may have been only to push its iPads and phones.

But estimates this year are that Apple Music will make US$2.87 billion in 2017, and has huge growth opportunity as it has only penetrated 3% of Apple’s install base.

Speculation is that Apple has signalled talks with Sony Music, with Universal Music looking like a distant third.

Apple giving Warner Music priority is part of its larger picture as it moves into the content producing business.

Aside from a Jennifer Aniston TV series drama, Apple is said to be interested in gaining the distribution rights to the lucrative James Bond MGM franchise.

Sony had the rights until Spectre in 2015, and it’s bidding for these along with Warner Bros, Universal, and Fox.

The franchise is worth $7.9 billion in 2016, according to Statistic Brain, including the movies, DVD sales, merchandise and novels.