Apple signs cut-rate streaming deal with Warner Music Group

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Apple has reportedly signed its first major music streaming deal since launching Apple Music in 2015.

Sources “familiar with the matter” say it has signed a new, cut-rate agreement with Warner Music Group, and is on the verge of reaching a similar deal with Sony Music Entertainment.

Under the agreement, Warner will provide Apple with a music catalog that boasts artists like Bruno Mars, Ed Sheeran, and the Red Hot Chili Peppers. Songs will be available to purchase from the iTunes Store, and to stream through Apple Music.

“Apple plans to pay record labels a smaller percentage of sales from Apple Music subscribers than it did under its first deal for the streaming service,” reports Bloomberg.

Apple likely has more power over this type of deal now that Apple Music is an established streaming service. In just six months following its launch, the service attracted 10 million paying subscribers, and that figure rose to 27 million by June 2017.

It is believed that rights holders like Warner are now willing to accept a slightly smaller share of sales from streaming services — provided those services continue to attract paying subscribers at a strong and stable rate.

Streaming services are now the largest source of revenue for the record industry, with physical and digital sales falling rapidly in recent years. Apple is expected to rake in around $50 billion from Apple Music alone by 2020.

Until now, the company has been paying labels a 58 percent cut of sales, but it is now looking to reduce that to 55 percent after Spotify was able to negotiate a rate reduction earlier this year.

“Sony Music Entertainment, owner of the second-largest record label, is also on the verge of a deal with Apple,” adds the Bloomberg report. Sources said the company is also hoping to reach a deal with Universal Music Group, but that is “further off.”