This headline is incredibly misleading. Apple and other streaming service providers don't pay a fixed royalty rate per play to labels or artists. They never have and never will.
These services pay out royalties based on total revenue generated from ads and/or subscription fees. Generally, the service keeps about 30% of what's generated and pays out the remaining 70% in royalties to labels & artists based on the percentage of that revenue they "earned"--with every song play essentially being a share.
For example (using very simple numbers, not based on industry standards):
Service X generates $100 from 10 subscribers.
of that $100, $70 of it will go to content owners.
If 10,000 songs were played (1000 per user), content owners would receive $.007 per play.
If those same users would play 20,000 songs instead, the payout per song would be cut in half. If they played 5,000 songs, it would double.
The number of songs played is irrelevant to the service provider, outside of the network volume they'll need to maintain.
If Apple has asked to cut rates in half, what they're really doing is asking the labels/artists to accept the idea of a $5 per month service from which they'll still receive 70% of the revenue.
Here's why that actually puts more money in content owners' pockets:
The people using premium streaming services today are power users. Many of them are early adopters that are playing thousands of songs per month. They're making the most out of their $10 per month investment.
By reducing to $5, casual users will become enticed. Casual users/listeners are a much larger part of the music consumer base. Easily a 10:1 ratio. Those consumers are likely to jump on a $5/month all you can eat premium service. Especially one as high quality as Beats Music. They won't listen to thousands of songs per month. They'll listen to a few hundred.
Here's how that affects the numbers:
$500 is generated from 100 subscribers (instead of just 10)
$350 of that revenue is divided between content owners.
Now 30,000 songs are played (avg. of 300 per user)
Payment per stream jumps to $.01167. (up significantly from $.007)
Most importantly, not only is the per stream revenue higher, but the number of streams is higher as well. An artist that may have streamed 10 songs under the old model, would now stream 40 at the higher rate.
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Do I personally think $10/month is more than fair for unlimited music? Absolutely. But I'm not a 22 year old who's grown up thinking music is free. Nor do I have a wife and 3 kids who also need subscriptions.
All of that is irrelevant however. The numbers don't lie, there's a balance point where reducing the price will attain critical mass with subscriber count. It's not unlike insurance programs. Insurance companies need lots of subscribers because most of them will make a limited number of claims, which offsets the cost of the customers who make lots of them.
That is making an awful lot of assumptions. You went from each listener averaging 1000 listens per month (at the $10 per month rate) and went all the way down to 300 listens per month per user for bulk.
One could easily do the math again...
@$10 a month, 10 subscribers would gross $100 to X companies.
@1000 listens per person per month, that's 10,000 plays, it equals $.01 per tune that gets paid out.
@5 a month, 100 subscribers would gross $500 to X companies
@600 listens per person per month, that's 60,000 plays, it equals $.008 per tune that gets paid out.
In this case, the bulk buying actually pays out much less.
So, I think a 40% in reduction is more realistic than a 70% reduction, but on top of it, you also make music less valuable to people. "Hey, I can get all I want in one month for $5, why should I ever buy music, when it's $15 a cd!? So, now the new mentality is, music is cheap and disposable.
Second, if you ever decide to not subscribe anymore, or the prices begin to rise too much, you own NOTHING. You don't own any MP3's, cds, etc. Of course, it's easy to steal music so why not steal it? That same type of mentality that makes it ok to steal music but not ok for someone to steal your car is hypocritical. In no way am I saying you condone stealing music, just the reality of what's going on.
So, I think throwing out assumptions based on numbers can go either way very easily. I hear your point, but I simply don't agree with the "make things as cheap as possible by buying in bulk." It tends to hurt those who make really quality products. You can't make a quality product for cheap unless you are asking people along the way to work for cheap and then everyone gets lowballed
And people complain that they can't earn a living wage in the US, well, this is one of the factors...there's more to it than that, but making everything as cheap as possible only makes those producing it suffer, be it music or clothing or food.
