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Apple Music issues statement on royalties, claims average pay-out of a cent per stream

By | Published on Monday 19 April 2021

Apple Music

Apple Music formally entered the economics of streaming debate late last week via an update for artists and labels on royalty payments.

While Spotify recently launched a whole website to explain and justify its business model, Apple will be hoping that its relatively short note will suffice given the main brag it contains: that average per-play payouts on Apple Music are double that on Spotify. It also takes a dig at Spotify’s paid-for marketing tools and in particular the in-development Discovery Mode.

Of course, most streaming services of the Spotify and Apple variety basically work to the same business model, which is revenue share based on consumption share.

That means there are no actual per-play rates. Instead money is allocated to each track based on the percentage of listening it accounts for, and then that allocation is shared with whoever controls the relevant recording rights and song rights. Usually 50-55% of the allocation would go to the label or distributor that controls the recording, and 10-15% to the publisher or society that controls the song.

However, in its memo on royalties last week, Apple sought to distinguish its employment of this business model. “While other services pay some independent labels a substantially lower rate than they pay major labels, we pay the same headline rate to all”, it stated, adding “we pay the same 52% headline rate to all labels”. On the songs side, it added, it pays “every publisher and licensor the same headline rate within each country”.

While conceding that there are no per-play royalty rates in streaming, Apple nevertheless claims that the average payout per stream “for Apple Music individual paid plans in 2020” was $0.01, once both recording and song royalties are taken into account. That’s a notable claim because of the campaign being run by the Union Of Musicians And Allied Workers in the US which is calling for streaming services to commit to a minimum one cent per stream payment.

That said, Apple’s claim is only possible when the maths is done specifically for “individual paid plans” of course, and it has to be accompanied by the explanation that “royalties from streaming services are calculated on a stream share basis” and therefore per-play rates vary “by subscription plan and country”. For any streaming service to actually guarantee a cent per stream royalty an alternative business model would be required.

The other reason why the cent per stream claim is notable is because that’s two-to-three times more than the per-stream rate that is often reported for Spotify, something that has been widely noted since the Apple royalty memo went into circulation.

Though, of course, when it comes to revenue share commitments, both Apple and Spotify are basically operating in the same ballpark. There are various reasons why – once averaged out – the Spotify per-play rate comes out lower that the Apple per-play rate.

Spotify having a free tier that generates much less revenue is the biggest reason, of course. Though even if you separate out monies paid over from Spotify Freemium and Spotify Premium, the latter still generally has a lower per-play rate than Apple.

That’s partly because of Spotify’s popularity in emerging markets where lower subscription prices are charged; partly because of a higher uptake of family plans and student discounts; and partly – Spotify itself claims – because its users are such big music fans, they just listen to more tracks each month.

Although the Apple Music missive never specifically mentions Spotify, it’s clear that the references to “some other services” basically mean its biggest rival in the streaming music domain. The insistence that Apple Music will never ask for a royalty discount in return for promo is also obviously a direct attack on its rival’s controversial Discovery Mode pilot, whereby artists and labels can influence the Spotify algorithm in return for accepting a royalty discount

Finally, Apple alludes to the debate around shifting to a user-centric model for royalty distribution. “Our analysis has shown that [this] would result in a limited redistribution of royalties with a varied impact to artists”, it states. “Per play rates would cease to be the same for every play of a song. But more importantly, the changes would not increase what all creators earn from streaming. Instead, these changes would shift royalties towards a small number of labels while providing less transparency to creators everywhere”.