Apple Caves to Swift; Your Move Spotify

FBN’s Jo Ling Kent on Apple reversing its decision to not pay musicians royalties during the 3-month free trial period for its music-streaming service and the robot Pepper that sold out in 60 seconds in Japan.

Singer Taylor Swift has been throwing around her weight to negotiate royalty fees with music labels. The two parties could not come to an agreement with Spotify, but soon-to-be-launched Apple Music (NASDAQ:AAPL) caved -- swiftly.

In a Tumblr (NASDAQ:YHOO) post on Sunday, Swift said she would not be releasing her latest album, “1989” on Apple Music because of the company’s unwillingness to pay artists during the three-month trial period. “I find it to be shocking, disappointing, and completely unlike this historically progressive and generous company,” she wrote.

The singer’s note gained significant traction on Twitter (NYSE:TWTR) and by Sunday night, Apple conceded.

“#AppleMusic will pay artist for streaming, even during customer’s free trial period,” tweeted Eddy Cue, senior vice president at Apple. “We hear you @taylorswift13 and indie artists. Love, Apple.”

“They want to get out on a high note, by staying in the good graces of musicians,” said Angelo Zino, analyst at S&P Capital IQ. “It’s a very good move for them.”

Some say the deal is symbolic of impending troubles for Spotify. This is a “game of high stakes poker and Apple just made their move,” said Daniel Ives, analyst at FBR Capital Markets. It is a “shot across the bow to Spotify.”

Apple Music and Spotify share more similarities than differences. For $10 per month, users can stream unlimited music from most major artists.

The new policy from Apple “underscores” how “Spotify's under tremendous competitive pressure from Apple Music,” said Sam Hamadeh, CEO of private capital research firm, Privco. “Spotify has to overhaul its business model to sustain itself long term.”

Apple Music was announced at the company’s annual developer’s conference earlier this month and is launching June 30th. Jimmy Iovine is helping to spearhead the service, showcasing why Apple purchased Beats Electronics for $3 billion for last year.

Spotify, which has long been rumored to be an IPO candidate, may be finding itself in a tough position, should Apple Music gain traction. Spotify has an early mover advantage, but Apple has the wherewithal to meet artist demands.

“We believe Spotify has to overhaul its business model to sustain itself long term, and do it soon,” predicted Hamadeh.