Apple trying to convince music labels to take a smaller revenue cut

Apple Music is slowly chasing its biggest competitor Spotify. Photo / AP

Since entering the music streaming world two years ago, Apple Music has been slowly chasing its biggest competitor Spotify.

The streaming service now boasts 27 million subscribers and has started branching out into online television, with Carpool Karaoke and an app development program.

With Apple Music's current deal with record labels set to expire at the end of the month, the company is expected to make a controversial move in the next round of contract negotiations - the tech giant is hoping to force record labels to take a smaller revenue cut from its streaming service.

Under the current deal record labels receive about 58 per cent of revenue from Apple Music subscribers.

Comparatively, Spotify was recently successful in its attempts to have its rate reduced from 55 per cent to 52 per cent during negotiations with labels.

While this might seem unfair, Spotify raised $A4.46 billion in revenue last year and boasts almost double the users of Apple Music - with its numbers continuing to grow.

The labels are open to a reduction in Apple's rate, but would need the service to show it is able to expand its subscriber base and meet other requirements - such as promoting iTunes in countries where streaming isn't as widely used.

As part of an approach to attract more customers, Apple will start to offer Groupon deals for its music streaming service.

Digital music market analyst Mark Mulligan said Apple Music needs to think outside the box to attract customers.

"Apple Music is growing fast but not as fast as Spotify," he told The Washington Post.

"It needs to widen its acquisition funnel to attract more users. Groupon is just one example of this strategy."

Mr Mulligan also believes Apple will start using its own devices and iOS to help win the battle against Spotify.

"Over the next couple of years Apple is likely to strengthen its position due to its ability to market directly to iOS device owners and to give increased priority to Apple Music within its devices.

"In effect Apple has an in-built advantage within the iOS ecosystem and by the same token, the ability to limit the reach of Spotify."