Interscope Records founder Jimmy Iovine did more than just show up at the Golden State Warriors practice on Tuesday, he also came forward to refute a rumor that had flipped the industry upside its head for a few days. HitsDailyDouble and Billboard reported last week that Iovine was leaving Apple Music in August, but now the 65-year-old tells Variety those claims are false. “There’s still a lot more we’d like to do,” Iovine said of his partnership with Apple. “I am committed to doing whatever Eddy [Cue], Tim [Cook] and Apple need me to do, to help wherever and however I can, to take this all the way. I am in the band.”
Iovine did reveal that some of the Apple stock that he acquired in the Beats Music sale to Apple does indeed vest in August, but that has no bearing on his status within the company. “There is a tiny portion of stock that vests in August, but that’s not what I think about,” Iovine said. “My contract is up in August, but the funny thing is, I don’t have a contract. I have a deal, and certain things happen along that deal. The bottom line is I’m loyal to the guys at Apple. I love Apple, and I really love musicians. That’s why those articles annoyed me, because it had nothing to do with reality. It made it out to be all about money.”
But, while Iovine’s job status with Apple is intriguing, what he revealed at a screening of The Defiant Ones at the Grammy Museum this week was far more interesting. There, Iovine let loose a few tidbits about Apple Music’s strategy going forward, and confirmed what many industry insiders have long assumed: Apple is looking to form a sort of hybrid record label.
Discussing streaming services and their effect on the music industry, Iovine said:
“The record industry right now is expecting technology to fix their problems, like they always have, and I’m not sure technology is going to fix their problems this time. It will make music better, it will make it sound better, and improve access and delivery, but I’m not sure that benefits the labels unless the labels do something to make the proposition more interesting. Everybody’s talking about the great oil gusher, but it’s not going to scale unless streaming gets more interesting.”
From there, Iovine went on to hint that Apple would be considering putting together “original content” similar to Netflix, essentially saying Apple could be acquiring original music and distributing it solely on their platform much like Netflix has with their original movies and TV series in recent years. “Netflix has a unique catalog, because they don’t buy HBO and they have their own catalog,” Iovine said. “Then on top of that they have a little thing called $6 billion in original content. HBO has $3 billion, Amazon probably has $4 billion. Well, guess how much original content streaming has: Zero! Fundamentally. All the catalogs are exactly the same.”
Many have assumed de-facto record labels would be the next step for the major streaming services. Such a set-up, wherein the streaming services would invest into artists and their products, similar to record labels, would be the only way to truly secure “exclusive content.” Even in Apple’s past deals with independent artists like Chance The Rapper or Frank Ocean, the exclusivity was only temporary, and for major artists like Beyonce or Apple figurehead Drake, the labels they are tied to eventually push their music onto competing streaming platforms.
If Apple were to step in and pay for original content, as artists exit their deals with the typical major labels, it could be pricey, but an arrangement with say, Drake, could also be lucrative for both parties. With a company as cash rich as Apple, an advance for a Drake album could be well into the eight-figure range, but instead of selling individual albums, Apple would hope to sell paid subscriptions, that at $10 a month would continue to sell themselves over and over. Basically, instead of selling an album once to each consumer for $10, they would be selling a subscription to each consumer for $10 a month, in perpetuity. So, instead of netting $10 for one Drake sale, they’d net $120 in a year, multiplied by however many Drake fans would rush to commit to the service in hopes of hearing his new music instantly and often. This would make the entire setup more than cost effective.
Since keeping new Drake music would also hurt their competitors, that business model makes sense for Apple Music and all of their streaming competitors. Once the first shoe falls, there could be several major bidding wars for major artists between the streaming services, and a rush to get out of their current deals from those same artists as they look to cash in. If Apple does decide to become a more overt alternative to a typical record label, it could be industry-shattering, and lead the music business into a whole new era. Record labels will never be fully defunct, but a much more lucrative alternative could put them on life support and force the majors to adjust.
Eventually, Iovine looked to another digital platform as an example of how the current state of affairs has skewered the economics of the music industry, tipping the scales towards the artist. Iovine said:
“What’s going on with Youtube — all of us who have kids here [know] there are artists on Youtube who have 5 million views who have never had a record deal or even met a lawyer. Well guess how much leverage that artist has going in to making deals? A lot of the new deals coming out are very [favorable] to the artist, which I completely applaud. That’s a different dynamic. The old deals are being replaced by new deals.”
The concept of the traditional record label and streaming services merging seems like a natural progression for the music industry, consolidating the music and the industry’s biggest revenue stream all into one place for consumers, and now that consolidation seems to be underway. “I don’t see myself at 75-years-old running around doing music,” Iovine said. “Right now, I’m committed to getting streaming right.” For Iovine, getting streaming right appears to be spearheading this transition into the next era of music consumption and distribution, and despite the rumors he’ll, be doing so with Apple, in the palms of our hands and for the low cost of $9.99 a month.