Apple Music acquired furore on Friday (Apr 16) when it fabricated some proud claims nigh its payouts to artists and songwriters – and, by clan, some potentially damning claims about Spotify's equivalent distributions.
Those claims all appeared in an email newsletter sent by Apple to the industry and creative person community. This newsletter has now been obtained by MBW and is re-published below.
Apple doesn't explicitly mention Spotify at all in the letter, although yous wouldn't guess it from the subsequent media coverage.
That's peculiarly true of certain headlines connected to the following exclamation from Apple tree: "Our average per play rate is $0.01."
The Wall Street Journal broke the story of Apple's letter of the alphabet on Friday, and within its report noted that: "Apple's penny-per-stream payment structure… is roughly double what Spotify… pays music-rights holders per stream."
This take (and it'due south a take that many other media outlets whipped up in headlines) should come with a neon-lit caveat: no major streaming service in the earth really pays out on a per-stream basis.
Instead, recorded music payouts from Spotify and Apple tree Music are figured out, past and large, via this two-footstep method:
(i) A service earmarks a total royalty pool of money, calculated as a certain share of its cyberspace revenues that month. The % of this acquirement share is previously agreed with labels and/or distributors;
(2) This royalty pool is then divided and paid out to labels and their artists based on their marketplace share of streaming book.
For example: if Universal Music Group acts claimed 40% of all plays on Apple Music one calendar month, and UMG had agreed a 35% net acquirement share, Apple Music would pay Universal Music Group 35% of 52% of its internet acquirement for the monthly flow.
Comparing how such a payout works out on a per-stream basis, then, is troublesome for ane reason above all others: Information technology risks making platforms with lower audience engagement look more generous towards artists/labels, and services with college audience appointment look less generous.
In other words: if music fans stream more on a service in a given month, its per-stream payout will go down; if music fans stream less in a given month, its per-stream rate will go upwardly.
Let'south get back to what Apple tree actually wrote in the letter, rather than contestable interpretations of information technology.
Below, you'll find last calendar week's total alphabetic character from Apple Music.
In a bid to combat some of the misinformation flying around, MBW has added our own commentary, in a bid to bring further clarity to Apple's claims.
Ane peculiarly interesting matter about Apple tree Music's letter is that the platform suggests information technology's examined the possibility of following SoundCloud with a user-centric/"fan-powered" royalty payout model, merely concluded this would effect in "limited redistribution of royalties with a varied impact to artists".
Another large talking point: Apple claims that it pays royalties to every single record labels based on the exact same revenue share rate (52%). However, it also suggests other leading streaming services (guess who?) pay different rates to different labels – with majors getting a higher figure than some indies.
In one case over again, read Apple tree'south newsletter in full below – with MBW'southward added commentary in scarlet – and make your own mind up.
Apple Music'due south latest newsletter: Office i
This update, which is function of a new series of newsletters, looks at how creators earn royalties from Apple tree Music and how these have grown over time.
Nosotros believe in the value of music and paying creators adequately for their work. Since we launched the iTunes Store in 2003, we have helped millions of artists and songwriters brand a living from music. Equally the discussion about streaming royalties continues, we believe it is important to share our values. We believe in paying every creator the same rate, that a play has a value, and that creators should never accept to pay for featuring.
Nosotros pay the same 52% headline rate to all labels.
While other services pay some contained labels a substantially lower rate than they pay major labels, we pay the aforementioned headline rate to all labels. This means artists can distribute music however they like, knowing Apple Music will pay the aforementioned rate. Sign with a label or stay contained; we believe in the value of all music.
We pay the same headline rate for all compositions.
Without songwriters, there wouldn't exist recordings. That is why we have paid every publisher and licensor the same headline rate within each country. It's as well why we have invested millions to optimize publishing operations to ensure songwriters are paid equally quickly as possible.
MBW's take: 1 revelation from this role of the letter is that Apple has now publicly confirmed that it pays a 52% internet acquirement share to recorded music rightsholders ("all labels").
This is the exact same cyberspace revenue share that Spotify pays the major labels today. Spotify renegotiated its headline rate down from 55% to 52% in 2017; Apple Music appears to have done the aforementioned in its concluding negotiating round, which fell in the aforementioned year.
(Payments to music publishers and songwriters are additional to this 52% share; overall, they tend to claim another 10-xiii% of each service'south net revenue. That said, Spotify is currently appealing a rate rise for publishers and songwriters in the Us, alongside Amazon, Google, and SiriusXM. Apple Music has declined to appeal this rise.)
Apple's main contention in the section in a higher place is one MBW will exist digging into once more: that other leading streaming services don't offer i unproblematic net revenue % rate to all labels, whether independent or major.
In the example of Spotify, we hear, this is a complicated situation, with some indies claiming they receive a lower effective (rather than headline) charge per unit than 52% due to sure contractual deductions and discounts.
Apple tree Music'south latest newsletter: Function Two
Our boilerplate per play charge per unit is $0.01.
While royalties from streaming services are calculated on a stream share basis, a play still has a value. This value varies by subscription plan and country merely averaged $0.01 for Apple tree Music individual paid plans in 2020. This includes characterization and publisher royalties.
We do not pay a lower royalty rate in substitution for featuring.
Apple Music's team of global tastemakers paw-curate 30,000 editorial playlists. These tastemakers select music based on merit and we do not ask anyone to have a lower royalty charge per unit in commutation for featuring. The same is truthful for Apple Music'southward personalized playlists and algorithmic recommendations.
MBW's take: We've dealt with why a 'per play' rate can be misleading before in this article, but there are a couple of other things worth mentioning hither.
Beginning: Apple has been conscientious to qualify that $0.01 per stream is the average payout from its private paid plans – which means it's kept its discounted bundles (like its $14.99-per-month Family unit subscription for up to half dozen people; or its multimedia Apple One subscription; or its $four.99-a-month Student subscription) out of the calculation.
Second: Apple has included both label and publisher royalties within this $0.01 per-stream effigy, which further complicates the moving picture. Recollect: the 52% headline charge per unit mentioned in the first section of Apple Music's newsletter but applied to labels / recorded music.
Peradventure more than interesting than all of this: Apple's "We do not pay a lower royalty rate in exchange for featuring," line is a clear attack on Spotify's 'Discovery Style' feature, which enables artists and labels to accept reduced royalty rates in order to improve the frequency of their tracks actualization via Autoplay and Spotify Radio.
Apple has its cheerleaders on this indicate. Concluding month, some of the world's largest indie labels co-signed a 10-point programme from merchandise body IMPALA which lambasted sure streaming services for offering "privileged treatment in algorithms or other features" for commercial proceeds. Wrote IMPALA: "This is payola, and has no legitimate place in improving viability and opportunity for creators."
Apple Music's latest newsletter: Function Three
As a consequence of our commitment to these values, Apple Music paid out royalties for more 5 million recording artists around the world in 2020, over one 1000000 more than in 2019. The number of recording artists whose catalogs generated recording and publishing royalties over $ane million per twelvemonth increased over 120% since 2017, while the number of recording artists whose catalogs generated over $50,000 per year has more than doubled.
Similar others, we have looked at alternative royalty models. Our analysis has shown that they would upshot in a limited redistribution of royalties with a varied touch to artists. Per play rates would finish to be the aforementioned for every play of a vocal. But more importantly, the changes would non increment 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.
At Apple Music, our focus remains on artists and songwriters and finding new and innovative ways for all creators to make a living from music. With Apple Music, music fans effectually the earth bask an uninterrupted ad-gratis feel while knowing their data is kept private and used only to raise the overall music feel for them.
MBW's take: Apple'southward numbers hither offer a useful comparison with Spotify, whose new Loud & Articulate website recently revealed the post-obit: the number of recording artists whose catalogs generated recording and publishing royalties over $1 meg per twelvemonth on its service increased by ninety% from 2017 to 2020.
Apple tree, obviously, says that its equivalent percent figure is college (+120%) on its platform.
That being said, Apple Music hasn't given united states of america a public update on its total global subscriber number since way back in June 2019, when Eddy Cue revealed it stood at somewhere over 60 million (including paid triallists). Spotify, which dissimilar Apple tree Music benefits from running an ad-funded ('free') tier it uses as a 'funnel' to upsell users into Premium, had 155 1000000 at the shut of 2020.
At the time Eddy Cue made that proclamation, Apple Music's global subscriber base was growing past effectually a meg each month. If it kept up that pace, information technology would be at around 80-85 million subs today.
Besides: Let'due south not a key stat slip hither. Apple says that information technology paid royalties to over 5 million artists concluding twelvemonth – a figure that grew by over a 1000000 in 2020 vs. 2019.
Clearly, the DIY creative person explosion is showing no signs of slowing down, on any of the leading streaming platforms.Music Business Worldwide
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