Apple reconsiders who pays for its “freebie” to consumers

Apple announced a 3 month free trial subscription streaming service to its consumers as part of its offering Apple Music. This sort of streaming is already provided by different providers such as Spotify, Rhapsody and Deezer, a market which Apple is new to. However, what Apple did not envisage was who was going to be paying for this “freebie”. Its announcement to consumers was that they would receive access to music streaming for 3 months on a free trial basis. At the same time its message to the music industry was that Apple would not be paying royalties for allowing consumers listen to their music.

This prompted Taylor Swift to post an online letter criticising Apple’s decision, in particular pointing out that artists don’t ask for free IPhone’s and so the company should not be asking them to work for free. Ms Swift was supported by others in the music industry such as UK –based independent record label Beggars, who said they “struggled to see why right owners and artists should bear this aspect of Apple’s customer acquisition costs”.

In response Apple changed its position regarding the music industry and announced that it would be paying royalties to record companies and music publishers for using their music. It is not clear how much Apple will be paying, although it is likely to be a cost to the company which it had not planned. Also with the stir that Ms Swift’s letter caused, this also impacts Apple’s image and relationship with the music industry as it enters a new market.

This particular “incident” is particularly important for a range of businesses and it is not confined to the music industry. Any business planning an expansion or promotion needs to carefully consider how third parties will perceive this and what their response is likely to be. As it proved to be the case with Apple not considering such issues and with a campaign on social media, the company was forced to reconsider. Similarly, it is essential to plan who will be paying for such an expansion or promotion that may look like is a “freebie” but is not. Failure to do this not only means the actual cost of the expansion or promotion comes back on the business but it may lead to additional associated costs such as damage to reputation and branding and loss of consumers.

If you are facing similar issues in your business or would like advice on exploiting intellectual property rights in contracts for marketing initiatives please contact Daniel Milnes.

Nat Avdiu

About Nat Avdiu

Nat Avdiu is a Paralegal in the Contracts and Projects team at Forbes Solicitors. Nat provides updates for clients on a range of issues including: governance, data protection and freedom of information, procurement and charity law.
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