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Eddy Cue clarified that artists will not be paid at the streaming rate they are paid during users paid memberships. They will be paid at a different rate that isn't being disclosed: http://recode.net/2015/06/21/apple-says-it-will-pay-taylor-s...

Also: "Cue says Apple will keep the existing royalty rates it has already hammered out with the three major music labels for subscribers."




That's during the free trial period. The higher rates remain once people are paid subscribers.


Right. But the trial could be significantly lower. They're not saying.

It's worth nothing that by "higher rates" we are talking about a hundredth of a cent per stream.


I'm sure the new trial rates will be broadly similar to Spotify's per-stream rates, which average[1] between $0.006 and $0.0084. Apple Music has no advertising; you can't pay a percentage of revenue that doesn't exist.

1. http://www.spotifyartists.com/spotify-explained/


They're licensing the music. Whether they make any revenue or not doesn't matter.

You can't hand out other people's stuff for free and then refuse to pay anything because you didn't make any money from it. And I'm saying that as someone who thinks the current copyright system is incredibly broken.


You can if that is the terms by which you licensed the music.


Likewise an artist can choose not to have their music on the service.


Unless Apple threatens to remove their music from iTunes if they don't agree to be on Apple Music as a few indie artists have publicly stated.


That point is valid, but Apple is trying to create a de-facto monopoly and even now it's really an oligopoly (which is only marginally better but in many ways worse). In such situations the power balance shifts dramatically and for many artists the choice they have is philosophical at best.


Unless the contract with their label says otherwise.


I mentioned that only to illustrate why they'll likely be paying a flat fee during the trial, rather than a percentage of the (non-existent) revenue.


They are not handing out music for free. They incur costs, such as IT costs, marketing costs, plus the costs of having amassed hundred of millions of users. You could just as easily turn your argument around: the musicians incur zero costs for putting their music on Apple Music.


So did record stores. They had rent, signage, advertising, staff salaries and electricity bills to pay. You can't say because we have costs to sell your music, that we should be able to take those costs and pass them to the music artist and consider that payment for their product.


Except they aren't passing any costs to artists. There is exactly zero marginal cost for artists. Artists make their music available for free for a mere three months in exchange for Apple making a massive investment in the service. Keep in mind that 99.9% of artists don't even make any real money from streaming royalties anyway, especially during such a small window! And if customers like the service, they'll pay and presumably be members, as part of the world's most powerful ecosystem, with higher royalty rates than other services, backed by a deep-pocketed company that will promote the living hell out of it. How is this a bad thing??


That would be relevant if record stores charged artists for their operational costs.

It doesn't matter how much money you make. You're using someone else's property and that's what you pay license fees for. Although I generally object the equivalence of physical and intellectual property -- this isn't any different from selling physical goods:

If you want to give a thousand records away practically for free, you still have to buy the thousand records and the producer has no obligation to give you a discount just because you're not going to make money with it. Not even if you have to pay for the cars to pick up and drop off the records and the wages of the people delivering the records. If you want to burn your own money, nobody is stopping you. But don't ask other people to add their money to the pyre for free.


Aren't you forgetting that this was about making sure artists were compensated for their work? That's been now met. Apple isn't going to offer them the same rate they would get when people paid for the service when they aren't just like Spotify doesn't pay premium-tier royalties on their free-tier users.


Why is that "worth noting"? Is that an unfair rate? If so, what is fair? Your implication is that "about a hundreth of a cent" per stream is not fair.


It was a typo meant to be "worth noting". Many people have bandied about Apple's "higher rate" than Spotify, but the difference is likely to be only one hundredth of a cent per stream. Apple will pay out 71.5% of their $9.99 fee vs the 70% that Spotify does. An extra $0.15 a month per subscriber divided by all streams works out to about one hundredth of a cent per stream difference. So, a popular artist's paycheck for millions of plays of their song would be $10,200 vs $10,000 using the typical average streaming payout of a little over 1/2 a cent per play.

Plus, there's the fact that Apple Music will cannibalize a lot more iTunes sales than Spotify does.


I think it was a typo and meant to be "worth noting"


Yep. And it appears that the Artists, like the music industry, really don't get that things have changed.

Hey, I'm old school. I can identify with them. I like to buy my music. I don't get subscriptions where if I stop playing I can't listen to anything.... but I find myself listening to podcasts-- 2 hour long podcast of EDM. My favorite one has several YEARS of podcasts and despite skipping months at a time I'm still over a year behind. I'm not paying them anything[1], they're not paying the artists anything (it's meant for promotion more than anything else.)

I did buy an album once.

So, even though my habits are different the industry has changed.

Apple is progressive. The whole point of the free trial is to get people addicted to the service. In the long run Taylor Swift will make more money from a free trial than if Apple offered the service without a free trial-- because more people will sign up and ultimately end up with royalties going to Taylor.

I think it's hilarious that Apple is (as ever, of course) portrayed as the bogeyman for trying to market a service that will make the artists more money.

Just like they are constantly derided for taking %30 of revenue (which is a huge improvement over the often %95 and worse terms that you had to accept before the iPhone came out).

Things have changed. I'll try this service and see if it changes my habits. If Tayler didn't make out from it in 6 months then go ahead, complain away and have some data to back it up.

But making a big to do about it now is kinda silly. Like people being mad that Apple gave them a free U2 album. Sure they handled it clunky and If they do it again I'm sure they will be better. But OH! Apple gave me free music! #FirstWorldProblems

[1] near as I can tell, it's a record label that puts out the podcast and I think it's their artists they're putting in it.


EDM follows a different model that has existed since the birth of house et al DJs: demo sets are given away free because:

1) most producers are DJs as well, and often (or at least historically) singles were used as much to promote the DJ as they were a revenue stream.

2) the few producers that weren't DJs were also engineers for other DJs who weren't very good in the studio. Thus they made their money engineering

3) most clubbers wouldn't be interested in a 7 minute unmixed single of their favourite club track. So the single sales generally go to other DJs (and there's thousands of DJs who never make it out of their bedroom - so the DJ scene is considerably bigger than it sounds).

The modern EDM scene is likely a little different these days since many EDM DJs are now also pop artists. But I think they still essentially follow this model.


> In the long run Taylor Swift will make more money from a free trial than if Apple offered the service without a free trial-- because more people will sign up and ultimately end up with royalties going to Taylor.

Someone did the math and came to a different conclusion: https://www.baekdal.com/opinion/taylor-swift-is-right-about-... . Assuming Apple Music generates $ 10 billion in revenue per year, artists never make up the cost while Apple saves $1.6 billion the first year of Apple Music.


Thomas Baekdal's calculation model[1] is fundamentally flawed to conclude with "artists never make up the cost".

Apple may be right or wrong with their optimistic projections but people need to at least understand the business proposition they are offering. The concept of "making up the cost" has nothing to do with recovering the 3 free months from Apple as if it was a closed economic system. The idea is that the musician recovers the 3 free months from the entire music industry because Apple will have a wider audience and a bigger platform.

flawed model: get $0 for 3 months and never get it back whether the future Apple payments total $1 billion, $10 trillion, or infinity.

Apple's model: get $0 for 3 months but you (potentially) come ahead because we pay higher royalty AND we have the potential to convert a bigger % of 800 million iTunes accounts to paid streaming subscribers which will exceed Spotify's 20 million subscribers.

In other words, the artist is supposed to make business comparisons based on:

-- lost $$ for not being on Apple's platform and only providing music to Tidal & Spotify

-- more $$ from customers switching away from Spotify

-- more $$ from new streaming customers that would never have paid for Spotify but would subscribe to Apple Music because the app is already preloaded on the iPhone and there's less friction

(Each musician was supposed to weigh those bullet points to see if the big picture of skipping 3 months of payment made financial sense. It may or may not.)

As an analogy, it's as if a merchant concludes that accepting credit cards will "never make up the cost" because paying the monthly fees for the VISA/Mastercard mag swipe terminal and the transaction rates of 2% will never be paid back by the VISA/MC corporate entity. That's only true if one has a bizarre concept of thinking of the payment network as a closed system.

However, rational businessmen think outside of the CC payment system and conclude that accepting credit cards is net positive because behavior analysis shows that customers spend more when they can use a credit card instead of cash or checks.

[1] Thomas Baekdal's arithmetic and logic:

  If we assume Apple Music will have $10 billion in revenue per year, we get this:

  First year: 
  70% royalty / no free trail = $7 billion to artists
  71.5% royalty / 3 months free = $5.4 billion to artists
  After five years:
  70% royalty / no free trail = $35 billion to artists
  71.5% royalty / 3 months free = $33.9 billion to artists
  After 10 years
  70% royalty / no free trail = $70 billion to artists
  71.5% royalty / 3 months free = $69.7 billion to artists
  So, the artists never make up the cost while Apple saves
  $1.6 billion the first year of Apple Music.*


Apple isn't progressive by having the artist paying the costs of Apple's trial offer. That is flat out dishonest if not theft.

The costs of trial offers are to be born by the company attempting to obtain subscribers or long term service. You don't have other people bear that cost for you, let alone product you have no legal right to profit off of.

I know, its a trial, how can their be profit. The profit is in the idea they will get a subscriber from the trial which is where the risk comes from. Apple should be taking the risk getting subscribers, not artist Apple chooses to play during the trial




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