Apple's cloud music hang-up

Company has deals with three of the big music labels to license a new cloud music service, but it has yet to nail down terms with the big music publishers, who own a separate set of rights.

Apple has deals with three of the big music labels to license a new cloud music service. And it is in talks to close a deal with holdout Universal Music Group, the world's biggest music company.

But when Apple gets its Universal deal done, it still won't be ready to launch.

That's because Apple has yet to nail down terms with the big music publishers, who own a separate set of rights. And Steve Jobs will need their sign-off, too.

While Apple came to terms with Warner Music and EMI Music weeks ago, and has now struck a deal with Sony Music, industry sources tell me the company doesn't have agreements with the labels' associated publishing companies--Warner/Chappell, EMI Music Publishing, and Sony/ATV. The deal Apple is about to sign with Universal also won't include publishing, I'm told.

The distinction between music labels, who own the rights to music recordings, and music publishers, who own the rights to songs' underlying compositions, seems small and technical. But it's an important one.

The two groups each get paid when their work is used, at different rates. And while all the big music companies have both a recorded music arm and a publishing arm, the two operate in different silos, and don't always share the rights to the same music. The Beatles' recordings, for instance, belong to EMI Music, while the bands' publishing rights are controlled by Sony/ATV.

The fact that ownership of a single song can be shared by lots of people is one of the reasons it's so hard to get anything done in digital music (recall that Google and Amazon both bailed on getting any rights at all for their cloud services). But the complexity isn't a deal killer, either.

In Apple's case, I'm told that the company doesn't have any theological hurdles to clear with the publishers. It simply started talking to the music labels first, and has only recently started negotiating with the publishers.

The only issue to hammer out is just how much Apple will pay for its service, which will let users move their music to Apple's "cloud" servers and then let them stream their songs back to different devices. But the two sides are at least "engaged" over the issue, says an industry source.

In many ways, this seems like a rerun of Apple's move to extend the length of the song samples it offers at its iTunes store. Apple planned to increase the duration of its samples from 30 seconds to 90 seconds last September. But it didn't get clearance from the publishers , and negotiations kept it from super-sizing the samples until December.

Music industry sources I talk to think Apple wants to launch--or at least announce--the cloud service at its developers' conference in early June. And if the hang-up is truly just about money, then that still gives dealmakers time to hammer things out. But remember that this is the music business, and simple things always take longer than they should.

 

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