Apple Inc.’s music chief Robert Kondrk has been pressuring major labels for releases similar to last year's Beyonce exclusive, excluding services like YouTube and Spotify to help shore up slowing download sales, according to music executives familiar with the conversations.
The tense talks with label executives during Grammy Week in Los Angeles in January were spurred by Beyonce’s success in launching her self-titled album exclusively on iTunes in December for one week, during which the album was only sold in its entirety. After the first week in which it did 1 million copies globally, the album was available for sale at other retailers, and fans were able to buy tracks separately. Crucially, the pop diva kept the album off streaming services for the first week, but made two of the album’s 14 tracks available on Spotify the second week after release. Even her official YouTube videos were kept to 30-second teasers.
As music download sales decline--digital track sales fell 5.7% from 1.34 billion units to 1.26 billion units in 2013, according to Nielsen SoundScan--Apple is pressing music labels to think about possible windowing strategies as a way to buoy faltering sales.
Apple operates the world’s largest music store and recently introduced an Internet radio service, but it does not have an on-demand music service similar to Spotify or YouTube. As a result, the iPhone and iPad maker has an interest in finding ways to preserve its iTunes sales business, which plays a vital strategic role in its overall content to hardware ecosystem.
In the meetings during Grammy Week, Apple’s iTunes contingent, led by Kondrk, even suggested the albums don't even have to be exclusive to iTunes, and that labels could give albums to other stores as well – but not streaming services. Republic Records’ artist Kid Cudi this week released his album ‘Satellite Flight’ exclusively to digital retailers -- led by iTunes.
Ironically, Kondrk also asked that individual track sales be locked down for a window of time before allowing tracks to be purchased separately making the album available to streaming services, said executives from two major labels. This runs contrary to the album unbundling strategy first negotiated by Apple founder Steve Jobs with his original iTunes store label deal in 2003.
Kondrk’s sales pitch may have been just what label executives wanted to hear. The industry has been ambivalent about YouTube and other streaming services, which pay slowly over time as people stream tracks compared to the immediate payoff of album sales.
“The iTunes theory was that because of the easy availability to access albums on YouTube it has punctured sales globally for track and albums," says one major label executive who is familiar with the iTunes complaint.