There were collective gasps yesterday when the Digital Music News website reported that Apple Music looks to be paying just 58% of the revenue through streaming to artists, in comparison to the c.70% that Spotify pay out.
Gasps turned to outright anger from some quarters when it was further revealed that artists would receive the grand total of 0% for streams during a user’s free trial. You read that right - nil. Nada. Nowt. Nothing.
Edit 22/06/15: Following feedback from independent labels and a number of artists including Taylor Swift, Apple have reversed their policy on paying for streams during a free trial and will now supply revenue to artists during this period too.
Firstly, those figures, whilst seemingly technically accurate, are misleading. As distribution network CD Baby wrote in a blog post: “There’s a big omission [in the Digital Music News article]: the payment of publishing royalties.
“The 58% figure stated pertains only to the portion of subscription revenue Apple Music will pay to the owners of the sound recordings being streamed.”
CD Baby clarifies: “So 58% of Apple Music’s subscription revenue will go to labels and indie artists that own their own recordings. But Apple Music will ALSO be paying other rights holders besides the owners of the sound recordings — namely publishers/songwriters.
“And when you add in the payments to these additional rights holders, Apple Music’s total payouts (when measured as a percentage of subscription revenue) is comparable to services like Spotify.”
Edit 22/06/15: Apple have since confirmed that a total of 70% of all subscription revenue will be paid to artists and other rights holders.
And the 0% of free trial streams has another factor lots are ignoring too; the trial is limited.
Whereas Spotify users can hold an ad-supported free subscription forever, an Apple Music user will get a maximum of three months to trial the service. Apple Music carries no ads, so even Apple isn’t gaining money from trials (indeed, it is bearing the cost of building and maintaining the whole platform).
A bigger picture
Overall though, there is a bigger picture we all need to look at. I’ve already written about why Spotify isn’t necessarily as evil as everyone seems to be making out, which goes into the history of the music industry online.
But as well as looking back, we need to look forward. Where is the music industry heading?
Well, Apple will know the answer to this better than most having had the world’s biggest music marketplace for the best part of 15 years in iTunes. They will have scoured their data and seen what we’ve all suspected for a while - sales, in the traditional sense of buying a product to download and ‘own’, are rapidly declining.
They will also have the data of how many people are downloading the Spotify (and other streaming services) app on Apple devices, as well as how many people are subscribing to that using Apple’s gateway as a payment method.
The average joe just doesn’t regularly buy albums anymore, even digitally, and they certainly don’t tend to listen to them in a full sitting like people used to. I would hazard a guess that in the light of convenient streaming through the likes of Spotify and YouTube even single sales are dropping like a stone.
So, back to comparing with history, we are at a stage similar to the period in the late 90s/early 00s between CDs and MP3s. At that point the record industry clung on to the old ways as long as possible, despite consumers wanting to move on, and ended up losing out massively. This time we’re moving from a purchasing model to a subscription model instead.
Time to embrace the change?
The tipping point is now: The sheer influence and breadth of access Apple Music has will almost certainly kill off the majority of (the already declining) music purchasing. iTunes is the family dog that is getting a little long in the tooth and will inevitably pass away soon, so Apple has got itself a new puppy to try to help soften the blow.
What does this mean for small bands and artists? In the short term I predict it will be difficult in a strange transitional period - and as things start up initially any revenues you currently receive will take a big blow. From the launch of Apple Music to the end of this year (and perhaps for a while afterwards) there will be literally no point in anyone buying music anymore as they try out the new service. Why would you buy a song or album on iTunes when you can listen to it free anyway?
To compound the issue, the 0% that artists receive during the three month free trial will ensure you are receiving a good nothing for that period, and loads of fickle people will likely cancel their Spotify subscription for a while as they sample the emperor’s new clothes, meaning you lose out on revenue from there too.
Edit 22/06/15: As stated above Apple has changed its stance on supplying revenue to artists during a user's free trial period and will be paying artists and rights holders. Whilst this is welcome news I still urge caution and suspect the broad points above remain; this is still a transitional period for the industry and overall revenues will still take a hit in the short to medium term.
Longer term, things might get better though. If anyone has the oomph to pull in mass adoption of such a service, it is Apple - and with wide usage, revenues will inevitably start to grow. Bear in mind it will be coming from a base of zero though, so this will take some time. There will be a point where revenues from streaming exceed those of traditional purchasing and Apple will likely have a theoretical model of when that will be.
With the success of its App Store, Apple also have vast knowledge of the benefits of going freemium and data to draw on about how it could work for this new venture. I suspect that the free trial of Apple Music will draw lots of people to the paid service, which is absolute key for this to work for everybody. Spotify’s free service can theoretically last forever, but the drawback of that is that more than 70% of Spotify users don’t upgrade to a paid product and artists don’t ever see the benefit of those better revenues.
The utopian dream?
Apple are keen to point out it is introducing features to help bands and artists on the platform, such as the Connect social stream (here’s how to claim your band/artist profile), but this is mostly a vanity exercise to differentiate from the competition. As with anything, including Spotify and others, just being on the service won’t immediately put you in front of a big audience on its own. Any serious jobbing band knows they should treat Apple Music as just one of many marketing channels for your product. Getting your stuff actually heard will still always be hard work.
I also get and agree with the arguments I’ve seen from some that there is no clear ‘opt-out’ and bands, particularly the smaller independents and self releasers, have pretty much been forced into Apple Music without any consultation or knowledge of what was to come (if you’re on iTunes, you are automatically on Apple Music and there is nothing you can do short of pulling your music from Apple altogether which is a bit cutting off your nose to spite your face).
The lack of information for smaller bands since the announcement is indeed a bit shitty.
I still maintain that streaming revenues for artists doesn’t feel right, but as stated in my previous Spotify article, I just don’t know what a fair amount would be for the right to play a song (this is the first question I ask people who argue against streaming and not one single dissenter has ever been able to coherently answer it).
Basically, streaming is the future and we all likely need to get on board with Apple Music. The big problem is that current bands and artists are the guinea pigs whilst it moves into the mainstream from the traditional purchasing model and this generation of budding musicians will, financially at least, be the big losers in it all as it finds its feet and balances out properly.