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Revised music royalty rules could hurt Apple's Beats Music, iTunes Radio

post #1 of 63
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The U.S. Justice Department is in the process of deciding whether to revise the laws regarding music royalty rates --?changes that could have an effect on Apple's streaming music offerings Beats Music and iTunes Radio.



The music industry is currently trying to overturn the current licensing rules, which are heavily regulated by the government. At the moment, the industry is required to license songs to anyone who wishes to rebroadcast at a reasonable rate.

The two performance-rights organizations that represent the music industry are the American Society of Composers, Authors and Publishers, and Broadcast Music, Inc., both of which have been around for decades. Restrictions were originally placed on the companies around World War II because of monopolistic practices, but now both ASCAP and BMI are attempting to have some of those restrictions limited, which would give them more flexibility in setting the prices for music rights.

If ASCAP and BMI are successful, analyst Rod Hall of J.P. Morgan expects the outcome to hurt Apple, which is attempting to gain a stronghold on the streaming music market with its iTunes Radio streaming service, and Beats Music on-demand subscription offering.

"Upward pressure on streaming costs could be a negative for Apple's newly acquired Beats Music unit," Hall said in a note to investors on Friday, a copy of which was provided to AppleInsider. "Typically, attempting to pass this sort of cost increase through to customers after the low price Genie is out of the bottle is tough in a competitive environment."

Radio


As the DOJ weighs the case, GigaOm this week offered a summary of how relaxing regulation on BMI and ASCAP would hurt streaming services like Apple's, along with market leader Pandora. Currently, the controlled royalty rates are at 1.7 percent of revenues for terrestrial radio stations, and 1.85 percent for Pandora.

But Pandora actually paid about 53 percent of its total revenue in royalties in 2013, because services like it and iTunes Radio must also pay for "sound recording rights." Terrestrial radio stations have avoided such fees thanks to their longstanding stature in American society and accompanying political clout.

Apple launched iTunes Radio last year as a Pandora-like service, serving up randomized tracks based on a user's music preferences. But with the music market moving toward on-demand subscription services, Apple also opted to purchase Beats, the premium headphone maker that also recently launched its Beats Music service. Both moves are seen as a way for the company to offset shrinking digital music sales.

Following the purchase of Beats, Apple put Beats Music CEO Ian Rogers in charge of iTunes Radio, uniting both streaming services under one leader at the company. Apple's streaming services remain behind market leaders Pandora and Spotify in terms of user adoption.
post #2 of 63
I thought iTunes Radio was ahead of Spotify: http://appleinsider.com/articles/14/03/11/6-months-after-launch-apples-itunes-match-already-more-popular-than-spotify

So I'm not sure why the article says "Apple's streaming services remain behind market leaders Pandora and Spotify in terms of user adoption"
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post #3 of 63

I'm still trying to figure out why there's still both Beats Music and iTunes? Why does Apple need 2 music services that compete against each other? Surely, there has to be a way to merge them into 1 service. Maybe in time...

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post #4 of 63
First off, there are three performing rights organizations. Along with ASCAP and BMI there is SESAC (which is a for-profit PRO). It's small, relative to the big two, but does represent a few big-name artists.

Secondly, as a member of ASCAP I think this is a good thing for artists and composers. The music industry (record & publishing companies particularly) have for decades finagled around ways to limit paying the artists their fair share of royalties and income. And now the streaming business, especially selective streaming, is making it worse.

I'm trying to find an article I saw a few months ago with illustrates how badly skewed the whole thing has become. If I find it I'll post the link to it.
post #5 of 63

Should affect Pandora more than Apple/Beats. Apple has cash and could easily afford any increase in the short term. Pandora has not yet made a dime, I believe, and this would only add to their financial woes.

post #6 of 63

Damn! Just when I thought Apple wasn’t doomed... it’s doomed again. Also strange is how this stuff only dooms Apple all the time. Everybody else appears to be immune. Or at least that’s how this and other articles seem to spin it.

post #7 of 63
Quote:
Originally Posted by macxpress View Post
 

I'm still trying to figure out why there's still both Beats Music and iTunes? Why does Apple need 2 music services that compete against each other? Surely, there has to be a way to merge them into 1 service. Maybe in time...


It's only been a few weeks since the acquisition was closed. Give it some time.

post #8 of 63
Keep in mind that using ASCAP or BMI are completely voluntary. There is also the Harry Fox Agency, another old timer in the music licensing business. None of these are required. They simplify (for publishers) the complexities surrounding royalty collections and licensing issues, but a music publisher could take care of these myriad details on their own also. In fact, it's arguably easier for a small publisher to manage the details now more than ever.
Edited by SpamSandwich - 8/15/14 at 9:56am

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post #9 of 63

Found the article. It was in The Atlantic.

post #10 of 63
Quote:
Originally Posted by macxpress View Post
 

I'm still trying to figure out why there's still both Beats Music and iTunes? Why does Apple need 2 music services that compete against each other? Surely, there has to be a way to merge them into 1 service. Maybe in time...

 

They just got clearance to finalize the deal like a month ago. Give them some time.

 

As for the subject at hand, i think that it's good that its being looked at. Get one set of rules going with limits on both sides to ensure that neither party can easily screw over the other. Hopefully some limits will also be put in so that artists don't get cut out of funds with these deals. 

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post #11 of 63
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Originally Posted by lkrupp View Post
 

Damn! Just when I thought Apple wasn’t doomed... it’s doomed again. Also strange is how this stuff only dooms Apple all the time. Everybody else appears to be immune. Or at least that’s how this and other articles seem to spin it.

Apple has been doomed since the late 90s and will still be doomed 50 to 100 years from now. I think the naysayers like to keep repeating that mantra to themselves to make it feel as real as possible...it's their escape from reality.

post #12 of 63
Quote:
Originally Posted by SpamSandwich View Post

Keep in mind that using ASCAP or BMI are completely voluntary. There is also the Harry Fox Agency, another old timer in the music licensing business. None of these are required, they simplify (for publishers) the complexities surrounding royalty collections and licensing issues, but a music publisher could take care of these myriad details on their own also. In fact, it's arguably easier for a small publisher to manage the details now more than ever.


I wouldn't be surprised if artists that sign up directly for sales on iTunes get or will soon get an option to allow their tracks on either or both services with clear reporting of how many plays right along how many sales and so on. Which would be a good thing

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post #13 of 63
A falling tide grounds all boats? Since streaming music is only a corollary business for Apple, this will not be the existential crisis it will be for others.
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post #14 of 63

We haven't heard the last negative news regarding Beats.

 

There's more to come. I'll bet my left testicle on that.

post #15 of 63
Quote:
Originally Posted by SpamSandwich View Post

Keep in mind that using ASCAP or BMI are completely voluntary. There is also the Harry Fox Agency, another old timer in the music licensing business. None of these are required. They simplify (for publishers) the complexities surrounding royalty collections and licensing issues, but a music publisher could take care of these myriad details on their own also. In fact, it's arguably easier for a small publisher to manage the details now more than ever.

True that they are all voluntary, but they are necessary if you are to get paid for the sales and performances of your work. ASCAP/BMI/SESAC are PROs that track performances (concerts, restaurants, clubs, radio stations, TV stations, etc) and collect royalties. Harry Fox is a mechanical rights agency (MRO/MRA) which tracks sales of physical or permanent download product (CDs, LPs, MP3s, iTunes purchases), and collects royalties related to that.

 

It's still unclear if it's "easier" for a small publisher to manage and collect all this data and royalties on their own. With the advent of the internet, there are countless avenues for products to be sold and/or streamed and broadcast. Plus all of the local as well as nationwide radio and tv/cable stations, clubs, concert venues, etc. etc. etc.

 

You usually end up doing (at best) a co-publishing deal with a major pub. If you're just starting out, it's usually solely via the major pub. So, the majors need these agencies to make sure all involved get that are royalties due.

 

If you're just starting out, and only playing local gigs with no physical/downloadable product, or limited sales, then yeah… no need for PROs/MROs. But once things start to take hold and your act starts getting noticed - even if you are doing things all on your own as a self-published self-released artist - you would be overwhelmed with the legal/accounting/paperwork/details/manpower necessary to recoup those royalties, taking away from your practicing/writing/performing.

post #16 of 63
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Originally Posted by Trubador View Post

True that they are all voluntary, but they are necessary if you are to get paid for the sales and performances of your work. ASCAP/BMI/SESAC are PROs that track performances (concerts, restaurants, clubs, radio stations, TV stations, etc) and collect royalties. Harry Fox is a mechanical rights agency (MRO/MRA) which tracks sales of physical or permanent download product (CDs, LPs, MP3s, iTunes purchases), and collects royalties related to that.

It's still unclear if it's "easier" for a small publisher to manage and collect all this data and royalties on their own. With the advent of the internet, there are countless avenues for products to be sold and/or streamed and broadcast. Plus all of the local as well as nationwide radio and tv/cable stations, clubs, concert venues, etc. etc. etc.

You usually end up doing (at best) a co-publishing deal with a major pub. If you're just starting out, it's usually solely via the major pub. So, the majors need these agencies to make sure all involved get that are royalties due.

If you're just starting out, and only playing local gigs with no physical/downloadable product, or limited sales, then yeah… no need for PROs/MROs. But once things start to take hold and your act starts getting noticed - even if you are doing things all on your own as a self-published self-released artist - you would be overwhelmed with the legal/accounting/paperwork/details/manpower necessary to recoup those royalties, taking away from your practicing/writing/performing.

It's not inconceivable that at some point Apple disintermediates these various agencies. Cutting out middlemen would streamline the music publisher's and musician's experience.

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post #17 of 63

The merger was completed less than a month ago. How fast could you merge two streaming music services?

post #18 of 63

I'm not sure how this dooms Apple as compared to their streaming music business peers. If anything, they are ahead. If the cost of streaming music is too high, then it makes iTunes music purchases more desired. Apple wins.  Right now they are making almost nothing on streaming as compared to their other businesses.

post #19 of 63
1 As long as it benefits the artist, this is great news.

2. Why is only Apple doomed?

3. Once Apple's services are merged their numbers will look a lot better but iHaters will find doom somehow.

4. Beats sucks and isn't worth 3B because I hate black people and hip-hop!!!!!!!!!!!!!111111
post #20 of 63

This is simply an evolution of the licensing rights in the music industry.

 

I'm sure that Apple will find a way to license the music from the artists for streaming, that will compliment the way Apple can collect and distribute funds to those who sell apps on Apple's App Store.

 

The artists most likely will receive residuals from either a song rental based model, a subscription based model, or an iAD revenue-sharing based model.

 

Whatever makes the most cents.

post #21 of 63
Quote:
Originally Posted by Trubador View Post

First off, there are three performing rights organizations. Along with ASCAP and BMI there is SESAC (which is a for-profit PRO). It's small, relative to the big two, but does represent a few big-name artists.

Secondly, as a member of ASCAP I think this is a good thing for artists and composers. The music industry (record & publishing companies particularly) have for decades finagled around ways to limit paying the artists their fair share of royalties and income. And now the streaming business, especially selective streaming, is making it worse.

I'm trying to find an article I saw a few months ago with illustrates how badly skewed the whole thing has become. If I find it I'll post the link to it.

 

Do you really think that if the industry groups are able to excise more royalties you'll actually see any of it? Because if so, you're wrong. The solution isn't to change the percentage charged to broadcasters, which since it's a percentage and not a flat number automatically rises with inflation and should be fine in perpetuity. Instead, the answer is to force the industry groups to actually go back to distributing money fairly and giving the artists their share.

post #22 of 63
Quote:
Originally Posted by macxpress View Post

I'm still trying to figure out why there's still both Beats Music and iTunes? Why does Apple need 2 music services that compete against each other? Surely, there has to be a way to merge them into 1 service. Maybe in time...
It takes time and obviosly iTunes is iTunes only and not android accessible like beats so there are contradictory ideas.
post #23 of 63
Bad deal. Wake me when it shows a profit off the $3B acquisition.
 
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post #24 of 63
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Originally Posted by Curtis Hannah View Post


It takes time and obviosly iTunes is iTunes only and not android accessible like beats so there are contradictory ideas.

 

Who gives a $hit about android...Fuc%$ them!

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post #25 of 63
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Originally Posted by lkrupp View Post
 

Damn! Just when I thought Apple wasn’t doomed... it’s doomed again. Also strange is how this stuff only dooms Apple all the time. Everybody else appears to be immune. Or at least that’s how this and other articles seem to spin it.

 

Yes, but where would we be if Apple wasn't doomed? We'd have nothing to talk about!

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post #26 of 63
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Originally Posted by mike1 View Post
 
Quote:
Originally Posted by macxpress View Post
 

I'm still trying to figure out why there's still both Beats Music and iTunes? Why does Apple need 2 music services that compete against each other? Surely, there has to be a way to merge them into 1 service. Maybe in time...


It's only been a few weeks since the acquisition was closed. Give it some time.

 

Still no iTunes Radio in the UK. I wonder whether it will ever arrive, or if we'll get Beats Music instead. We don't have that, either.

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post #27 of 63
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Originally Posted by Apple ][ View Post
 

We haven't heard the last negative news regarding Beats.

 

There's more to come. I'll bet my left testicle on that.

 

No need. The Apple of your eye will do. :)

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post #28 of 63
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Originally Posted by jkichline View Post
 

The merger was completed less than a month ago. How fast could you merge two streaming music services?

 

As fast as the speed of sound?

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post #29 of 63
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Originally Posted by Apple ][ View Post

There's more to come. I'll bet my left testicle on that.

C'mon, bet something you'd actually miss not having. 1wink.gif
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post #30 of 63
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Originally Posted by dasanman69 View Post
 
Quote:
Originally Posted by Apple ][ View Post

There's more to come. I'll bet my left testicle on that.

C'mon, bet something you'd actually miss not having. 1wink.gif

 

His pips?

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post #31 of 63

The article tries to paint the increased streaming costs as a problem for Apple, but Apple is fine either way.
The fact that streamers were getting a royalty rate equal to radio was bad for the status quo industry. Radio is promotion for the sale of music, and people then buy tunes so they can hear the music they want, when they want, instead of randomly on the radio. Streaming services that allow you to target your music enough, reduce the need to purchase music at all! Bad for artists and cd and iTunes sales.
Apple had to get into streaming if iTunes sales were to decline, but higher costs for streaming will make purchasing music a valid choice and help iTunes. Beats and iTunes Radio for one way, iTunes sales for the other. Win, win!

post #32 of 63
I tried Beats for a few weeks, IMO iTunes Radio is better than Beats & Pandora is better than iTunes Radio
post #33 of 63
In fact, iTunes Radio is more popular than Spotify by a considerable margin, at least the last time a survey was done.

http://www.electronista.com/articles/14/03/10/close.to.capturing.second.but.still.far.behind.reigning.champ.pandora/

Now this survey was done in March, and things could have changed since then.
post #34 of 63
Quote:
Originally Posted by macxpress View Post
 

I'm still trying to figure out why there's still both Beats Music and iTunes? Why does Apple need 2 music services that compete against each other? Surely, there has to be a way to merge them into 1 service. Maybe in time...


They may merge them, but Beats is a *powerful* brand name, and Beats Music is a paid subscription service. Simply put, iTunes Radio is entirely different. On top of being free (big difference #1), it uses technology to help users build their own custom stations in a very different way than Beats Music (big difference #2). Also, iTunes Radio is available in I think two countries outside the US (big difference #3), with more coming "soon" (depends on your definition of soon, but the UK and Canada look to be next up for expansion. Beats' license is US-only, and that will take some work to fix (though I'm sure Apple will make efforts on this).

 

I could see the Beats Music "folded into" iTunes Radio as a subscription option, but I expect it to stay as a separate app and service for a while yet.

post #35 of 63
Quote:
Originally Posted by stargazerCT View Post
 

Apple has been doomed since the late 90s and will still be doomed 50 to 100 years from now. I think the naysayers like to keep repeating that mantra to themselves to make it feel as real as possible...it's their escape from reality.

 

Not sure why you guys haven't figured out this song and dance yet. You blame "Apple Doom" talk on naysayers and android fanboys. Sounds cute but it's really Apple friendly media that guzzles this stuff like it's the fountain of youth. Calm waters is bad for the media business, bad for ad impressions and bad for underpaid writers trying to make it in this cold cruel world. Tech writing is a very mild form of trolling. If they can get their reader base fired up and make them feel like they're under attack, the suits upstairs are high fiving each other literally.

post #36 of 63
Meh.

You fail to take into consideration the amount of money Apple has at it's disposal.

It could buy a couple of the major music labels and use them as leverage to get fair deals out of other labels (like sony) that have their own music services.

This could actually work in Apple's favour - say they buy one of the big American labels - they could then both double dip profits (from both the selling to iTunes and the consumer from iTunes) and offer content at discounts, etc..

Apples main competitive advantage (other than it's brand) at the moment is the sheer size of it's cash balance. They are the Microsoft of the noughties.
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post #37 of 63
Quote:
Originally Posted by Apple ][ View Post
 

We haven't heard the last negative news regarding Beats.

 

There's more to come. I'll bet my left testicle on that.

Now tell me, awesome-scientific guy, how scientific is your post?

How fact-driven is it?

What are the criteria to bet your left nut on?

post #38 of 63
Quote:
Originally Posted by Blitz1 View Post
 

Now tell me, awesome-scientific guy, how scientific is your post?

How fact-driven is it?

What are the criteria to bet your left nut on?

 

It's a prediction. My predictions are more often correct than not. That's not to say that I am never wrong. It happens on rare occasions, and I will readily admit when I am wrong.

 

It is based on my above average knowledge of Apple related things and it's also based on a hunch of course, which is basically an educated guess. There is always a certain degree of randomness and uncertainly involved when predicting future events.

 

Would you be willing to bet against me?

 

I doubt it.

post #39 of 63
Quote:
Originally Posted by Arbiter8 View Post

I thought iTunes Radio was ahead of Spotify: http://appleinsider.com/articles/14/03/11/6-months-after-launch-apples-itunes-match-already-more-popular-than-spotify

So I'm not sure why the article says "Apple's streaming services remain behind market leaders Pandora and Spotify in terms of user adoption"

 

Apples to oranges comparison. Spotify, Rdio, and Beats are on-demand services, allowing users to listen to whatever they want, whenever they want. Pandora and iTunes Radio are radio-like services that play random songs supposedly based on the listener's tastes, but often do so poorly.

 

 

Quote:
Originally Posted by macxpress View Post
 

I'm still trying to figure out why there's still both Beats Music and iTunes? Why does Apple need 2 music services that compete against each other? Surely, there has to be a way to merge them into 1 service. Maybe in time...

 

iTunes Radio is like Pandora. Beats Music is more like Rdio and Spotify. Totally different concepts.

 

Quote:
Originally Posted by Robin Huber View Post

A falling tide grounds all boats? Since streaming music is only a corollary business for Apple, this will not be the existential crisis it will be for others.

 

Apple's music sales have been doing poorly as users migrate to streaming services. That is the key reason behind Apple's purchase of Beats.

 

Quote:
Originally Posted by pazuzu View Post

Bad deal. Wake me when it shows a profit off the $3B acquisition.

 

Beats' headphone business generates over $1 billion in revenue, selling high priced products with fat profit margins. It shouldn't take long for Apple to recoup their acquisition cost based on this alone. Meanwhile, Apple desperately needs Beats' on-demand music service since iTunes music sales have been circling the bowl for some time now and iTunes Radio, frankly, sucks.


Edited by freediverx - 8/16/14 at 5:50am
post #40 of 63
Quote:
Originally Posted by Benjamin Frost View Post
 

 

Still no iTunes Radio in the UK. I wonder whether it will ever arrive, or if we'll get Beats Music instead. We don't have that, either.

 

You're not missing anything. Random play music services like Pandora suck and iTunes Radio is even worse.

 

On demand services are great but Beats is not yet available outside US. In the mean time I'd suggest Rdio or Spotify (although the latter's business model doesn't seem sustainable.)

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