Apple Music Royalties During Free Trial May be Lower Than Expected

[MacRumors]

After posting an open letter to Apple on her Tumblr page about Apple's free streaming policy for its upcoming music service, popular artist Taylor Swift managed to get the company to change course -- Apple now planning to pay artist royalties during its three-month free trial period of Apple Music. But, thanks to a new statement provided to The Wall Street Journal, it appears artists' satisfaction with the policy change could become turbulent again, with the Cupertino-based company suggesting the royalty rate during the free trial period will be somewhat lower than normal.

Apple declined to say how much it plans to pay during the trial period, though it said the rate will increase once customers start paying for subscriptions. In the first three months of the service's life there will be no subscriber royalty rate on which to base the rates. The company could find other ways to calculate a rate and is expected to share its plans with music companies soon.

Apple risks raising the ire of Ms. Swift and others if it comes in with what would appear to be a lowball offer.

Attempting to ballpark Apple's possible payment rate for the free trial, The Wall Street Journal compares the Apple service to Spotify's free, ad-supported option, which they point out pays royalties of "about one-fifth of the subscription service." Last December, that was essentially 0.14 of a cent for each listen in the United States, which Spotify had to pay a grand total of $5.8 million for its free tier alone for the month.

If Apple goes in under its traditional 71.5 percent revenue sharing policy -- which is likely to happen given the wording used when speaking to the WSJ -- it could still end up paying out millions of dollars to the various artists, songwriters, and producers that Swift became the defacto figurehead of after Apple listened to her letter over the weekend.

Although, as the WSJ points out, some in the industry appeared content with the original free trial period policy, given Apple's promise of an above-industry standard of 71.5 percent royalty payment, compared to the basic 70 percent payed out by competitors such as Spotify and Google. Apple has yet to comment any further on the issue, but its shifting viewpoint on the topic, so close to Apple Music's launch, is undeniably an impressive feat for Swift.

Article Link: Apple Music Royalties During Free Trial May be Lower Than Expected

 

[Crosscreek]

Somebody ran the numbers on this deal and it takes 8 years for an artist to recoup the benefits. Just pay the royalties Apple.

 

[mimeArtist]

It's a tricky one... obviously more tracks are going to be played as more people will be using the free trial than when they have to pay. More a case that Apple just either need to put their money where their mouth is, or trust that the service is good enough and just charge from the outset... or not offer such a long trial in the first place

 

[penajmz]

Nobody saw this coming?

 

[parnas]

Apple regrets their decision to open source Swift already.

 

[Menel]

Somebody ran the numbers on this deal and it takes 8 years for an artist to recoup the benefits. Just pay the royalties Apple.

It's easy to spend money that isn't yours... especially based on unreferenced, mystery sourced figures pulled out of your ass.

 

[Zxxv]

In other news

Taylor Swift ruins Apple's above-industry standard of 71.5 percent royalty payment...

...As Apple lowers royalty payment in response to Taylors outburst Indie artists see payouts drop, get pissed at Taylor for not keeping her mouth shut

 

[Benjamin Frost]

Cough up, Apple.

Enough with the nickel and diming.

 

[Even Longer]

Oh, what a surprise! El Capitan Cook won.

 

[baryon]

It's Apple's decision to have a free trial, not the artist's, so why doesn't Apple deal with it? If Tesco gives you free Kit Kats as part of a promotion, then they don't automatically expect Kit Kat to give them for free to Tesco. If you get a free 1 month trial of Photoshop, that doesn't mean the developers don't get paid for a month, it means Adobe figures it out from their own stock of money.

 

[applesith]

Then just let the complaining artists withdraw their music. This is getting so stupid with the back and forth.

 

[iansilv]

Do NOT piss off Taylor Swift!

 

[iansilv]

Seriously though- I don't understand the three month trial- you can test it out in a week- why the long free trial?

 

[jdillings]

Eddy already confirmed this in his recent phone interview with Re/Code. They aren't going to pay the same rate they are paying for subscribers because the rate is already higher than normal under the expectation that they wouldn't be paying royalties during the trial.

 

[Zxxv]

It's Apple's decision to have a free trial, not the artist's, so why doesn't Apple deal with it? If Tesco gives you free Kit Kats as part of a promotion, then they don't automatically expect Kit Kat to give them for free to Tesco. If you get a free 1 month trial of Photoshop, that doesn't mean the developers don't get paid for a month, it means Adobe figures it out from their own stock of money.

Not the same thing. If apple were giving away physical goods, i.e. cds, records or tapes then your argument would hold some weight as the physical goods need to be manufactured. No one is working for free in the music streaming rights. The songs have already been made and no physical goods are being given away.

 

[spazzcat]

Seriously though- I don't understand the three month trial- you can test it out in a week- why the long free trial?

Why not? They are going to be trying new things, it will take time for them to adjust things and people will be less likely to complain when it's free...

 

[horsebattery]

It's Apple's decision to have a free trial, not the artist's, so why doesn't Apple deal with it? If Tesco gives you free Kit Kats as part of a promotion, then they don't automatically expect Kit Kat to give them for free to Tesco. If you get a free 1 month trial of Photoshop, that doesn't mean the developers don't get paid for a month, it means Adobe figures it out from their own stock of money.

Comparing apples and horsespit there. The suppliers in your analogies are already paid. This wasn't the case with the artists before. And the article's point here is that Apple is allegedly paying a lower figure for the trial period. That's the difference here.

 

[Zxxv]

Seriously though- I don't understand the three month trial- you can test it out in a week- why the long free trial?

I think its to get people away from spotify etc and onto apple music. The longer the trial the less likely people are to leave.
Thats my take on it.

 

[AngerDanger]

Apple regrets their decision to open source Swift already.

I'll say! It's developing much quicker than anybody anticipated and is already responsible for one of the best-selling albums of the last two years!

 

[horsebattery]

Seriously though- I don't understand the three month trial- you can test it out in a week- why the long free trial?

If we assume that Apple had expected to not provide royalties during the trial period, then however long they drag that out is primarily positive for them; it'd also be a way to stick it to the existing streaming services as well - they don't have Apple's deep pockets to afford that privilege.

 

[MacrumoursUser]

Not the same thing. If apple were giving away physical goods, i.e. cds, records or tapes then your argument would hold some weight as the physical goods need to be manufactured. No one is working for free in the music streaming rights. The songs have already been made and no physical goods are being given away.

Biggest ******** i've ever heard.

 

[Mak47]

I work in music, I also agree that Apple needs to pay artists something during this trial. They're too big not to, for smaller labels and indie artists it would be a tremendous burden to not bring in revenue for 3 months.

Still, there's no way to make everybody happy here. Streaming payouts are based on a revenue sharing model--not a predetermined royalty fee. So with no revenue coming in, and no way to know which free users will eventually pay up, the amount Apple pays will have to come out of thin air.

Artists would be very smart to take advantage of Connect during this time--push out links to merch, concert tickets and vinyl versions of their music to the hopefully increased number of people discovering music over the first 90 days.

 

[Zxxv]

Biggest ******** i've ever heard.

Then you have lived a very sheltered life

 

[keysofanxiety]

Then just let the complaining artists withdraw their music. This is getting so stupid with the back and forth.

What's really stupid about this is Apple said people would get 3 months free, and we all applauded. Apple acted like they were doing the consumers a favour, and yet expect the artists not to get paid an appropriate revenue amount - or expect them to do it for free? These are the artists who make Apple music; the whole concept of Apple music would not exist without musicians to put their music on. Furthermore, the artists/recording companies have to pay Apple for the courtesy of getting their music up on there.

Plus Apple aren't exactly short on cash.

How this doesn't leave a slightly sour taste in your mouth is incredible.

 

[tasset]

I give Apple credit for trying to support the arts, music sales/streaming is at best a break even for Apple (when you figure all the effort spent) and at worse a loss leader to drive brand status. The 'artists' still have a generation-long false expectation that things will return to the excesses of the 80's-90's where they can turn out one hit song and the consumers have to shell out $15 for it. This chart is all you need to know. Sales from recordings aren't coming back. Ever. Deal with it, now get on those tour buses and stump for merch sales.

http://www.asymco.com/2015/01/22/bigger-than-hollywood/