Early Friday, Apple Music sent a carefully worded letter to artists, music labels and publishers, briefly explaining “how creators earn royalties” from the world’s second-largest streaming service, behind Spotify. The letter, which was not sent to the press, was obtained by the Wall Street Journal, which published a report that was not inaccurate, but because it was the only reliable source of news for the media, it was often reported inaccurately – most commonly in several headlines that claim that Apple Music pays twice as much per stream as Spotify.
variety obtained the letter from three different industry sources and, although it makes no direct reference to Spotify and no direct claim that Apple Music pays twice as much per stream, the Swedish company – and in particular a public report it issued last month past, trying to clarify royalty policies – is clearly the target of some of his bolder statements. Specifically, some of the statements in the letter were not fully communicated in the initial report. (Representatives for Apple Music and Spotify refused varietyrequests for comment.)
The per-stream rate is addressed in a short paragraph in the letter, which reads in full: “Our average playback rate is $ 0.01. While royalties from streaming services are calculated based on a flow rate, a piece still has value. This varies by subscription plan and country, but averages $ 0.01 for individual plans paid for by Apple Music in 2020. This includes label and publisher royalties. (It does not provide details on how the media was reached.) The letter also mentions elsewhere that Apple Music pays “the same 52% title rate for all labels.”
The WSJ article breaks down this paragraph more or less precisely, writing: “In the letter, Apple says it pays 52% of subscription revenue or 52 cents of every dollar for record labels. Spotify, which generates revenue from both subscriptions and its free ad-supported level, says it pays ⅔ of every dollar of revenue to rights holders, 75% to 80% of that amount on labels, which translates to at 50 to 53 cents per depending on the agreements between the service and different labels. ”
However, the nuances have been lost in some of the wording: The first sentence of the article says: “Apple Music told artists that it pays a penny in cash in a letter reviewed by The Wall Street Journal” – which does not specify which pays a penny per stream – and while the main title of the article reads: “Apple Music reveals how much you pay when you stream a song,” a secondary headline says, “Apple Music pays artists twice as much as Spotify on flow. ”
It’s not hard to see how inaccurate reports, which weren’t mentioned, but could have been inferred from the letter and article, could have been misinterpreted – and could lead some artists to believe they’ll get a penny from Apple. every time their music is broadcast, or even that the company has has increased its rates to pay artists a cash flow. In reality, the variables make comparisons between apples (sorry) almost impossible, but multiple sources say that the tariffs of the two companies are actually much closer than the inaccurate titles of Friday would imply.
But more on the subject, the confusion plays directly into widespread confusion or lack of knowledge about how artists make money from streaming services and how deceptive per-stream rates can be (Spotify states this last point clearly in the report its last month).
First, in reality, streaming services rarely pay artists directly: they pay rights holders, usually labels and publishers, who take the cut and then pay the artists their share.
Second, several industry sources say variety that while the per-stream model may seem like a streaming royalty metric that you can’t understand, it’s an old and even inaccurate way to measure the power of a streaming service.
“No one is watching the per-stream [metrics] moreover, at least not internally “, says an executive of a large music company variety. “We look at the overall increase in subscriptions, the churn rate – the goal being a low rate because it means people stay around – and the conversation rate, which is how many people stay after the free trial period or, in the case of Spotify , switch from their ad platform to a paid one. ”
The executive concludes: “What we want to see is a lot of users who broadcast a lot of music” – which seems dazzlingly obvious. But more users and more streams can actually mean one lower per-stream rate. For example, if an artist collected a high percentage of streams on a less popular streaming service, their stream rate would be quite high – but in fact they would have fewer flows than would be on a site with more users. (Spotify has 155 million industry-leading paying subscribers and 345 million active users, according to its latest report, while Apple last reported more than 60 million music subscribers in June 2019.)
In reality, there are far too many factors involved in streaming royalties to be reduced to a simple and straightforward formula: In addition to the subscription plan, country of origin, number of users on the site, and multiple other factors, some tags may have offers different with different streaming services. In one of Spotify’s veiled digs, Apple Music states in its letter that it pays “the same 52% title rate for all labels”; say the sources variety that Spotify has different offers with different labels, although the specifics were not immediately available. (In the US, publishing fees are set by the Copyright Board and are apparently the same for all music streaming services.)
The economic policies of most countries are based on the premise that healthy competition is good for business and there is no doubt that streaming has saved the global music industry in many ways. But as artists struggle to understand the extremely confusing process of paying royalties, the last thing they need is more misinformation.