Apple proposes flat streaming music royalties for songwriters, at the expense of Spotify, YouTube

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in iPod + iTunes + AppleTV
Apple has submitted a proposal to the U.S. Copyright Royalty Board that would simplify streaming royalty rates paid to songwriters, and significantly increase the rates paid by Spotify and other services that offer free, ad-supported music streaming.


Apple Music for iOS 10




A report by Ben Sisario for the New York Times surfaced the company's submission to the Copyright Royalty Board. Amazon, Google, Pandora, Spotify and the Recording Industry Association of America are also expected to weigh in with their own proposals.

The Copyright Royalty Board is accepting input on future statutory rates that would be applied to downloads and interactive streaming services starting in 2018.An interactive stream has an inherent value regardless of the business model a service provider chooses" - Apple

Apple recommended a set songwriting royalty of 9.1 cents per 100 song streams, to replace existing complicated federal streaming rules that enable its competitors--particularly Spotify and YouTube--to offer free streams of music that effectively pay artists very little and devalue music playback as a service.

"An interactive stream has an inherent value," Apple's proposal states, "regardless of the business model a service provider chooses."

Apple Music does not offer a free "interactive" streaming tier as Spotify does, or as Google enables on YouTube. Increasing royalty rates to a flat minimum would make it much more expensive for Apple's streaming rivals to offer unpaid streaming services, as advertising would not cover the difference.

The music industry has increasingly complained that free streaming services don't pay enough in royalties, and that the easy access to libraries of artists' music on sites like YouTube essentially erase the demand for paid services that deliver artists higher royalties.

In an interview last month, Nine Inch Nails frontman and Apple Music Chief Creative Officer Trent Reznor said of YouTube's unpaid streaming services, "it is built on the backs of free, stolen content and that's how they got that big. I think any free-tiered service is not fair. It's making their numbers and getting them a big IPO and it is built on the back of my work and that of my peers."

Apple currently pays out about $7 in royalties for each $10 monthly Apple Music subscription. The company's last report on subscribers stated that it had 15 million paid subscribers.

Spotify says it has 30 million paid subscribers, but it also provides a "fremium" unpaid tier of interactive streaming service to another 70 million users, who also hear ads. Apple complains that Spotify's unpaid tier hurts the industry and artists.

In turn, Spotify has complained that in order to reach iOS users in the App Store, it has to pay Apple a cut of subscriptions sold through the App Store. It does not have to pay Apple anything for subscriptions it sells on its own.
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Comments

  • Reply 1 of 36
    Rayz2016Rayz2016 Posts: 4,556member
    I have two questions.

    Number one: does Spotify pay any of its advertising royalty to the artists who are streamed on their free tier?

    Number two is not really a question, more of a scenario: Apple proposes a new royalty scheme that will pay artists more money. They adopt it and the music industry rejoices. Following a few anonymous complaints, the guv'mint decides that since the music industry are all giving more exclusives to Apple then something fishy is going on. They sue Apple and the music industry. The music industry settles and slinks off to a corner, leaving Apple to carry the can. A judge declares Apple guilty before the trial has begun, and so the company loses and has to put up with a court-appointed monitor who bills them millions while doing nothing, and Apple also ends up paying a massive fine. 

    Does this scenario give anyone a sense of déjà vu?

    My tuppence worth of advice to Apple: drop this – now.

    edited July 2016 rotateleftbytecornchipzeus423yoyo2222latifbpkermit4krazyjony0rob53
  • Reply 2 of 36
    Rayz2016Rayz2016 Posts: 4,556member
    ↑↑↑↑↑
     :D 
    First post, and that's the best he can do. Where's the originality? Where's the suspense?

    edited July 2016 repressthistrillotjfc1138mwhitelostkiwicalibadmonkcornchipredgeminipapscooter63
  • Reply 3 of 36
    magman1979magman1979 Posts: 1,114member
    RickeyP21 said:
    Poor Apple. "Only" making $45 million per year for playing someone else's content. However do you stay in business with your over priced laptops and $800 iPhone sales. I know, why don't you screw over music fans everywhere and force them to pay your over priced fees instead of using better products like Spotify!
    I hate fucking trolls, bunch of god damned losers on the Internet
    repressthistrillotmwhitecalicornchipredgeminipalondorai46baconstangzeus423
  • Reply 4 of 36
    RickeyP21 said:
    Poor Apple. "Only" making $45 million per year for playing someone else's content. However do you stay in business with your over priced laptops and $800 iPhone sales. I know, why don't you screw over music fans everywhere and force them to pay your over priced fees instead of using better products like Spotify!
    Free was never the model. Radio Stations, restaurants and bars all pay royalties. Why people like you feel entitled to free stuff is beyond me. Do you refuse to pay for newspapers and magazines because they have ads in them? Or maybe you're going to give up paying for cable because networks also make you watch ads? Or maybe you haven't noticed how ad free services come at substantial premiums or in the case of public tv are subsidized. I suppose you could use OTA TV and Radio to support your argument, but TV ads were placed at massive premiums to cover production costs (unlike radio) and radio paid far lower royalties than Apple is proposing in the hopes that it would promote the artists concerts and record sales. Two COMPLETELY different scenarios. You don't have the opportunity in either case to constantly replay and effectively own the content with OTA, whereas you do with a digital archive. I suppose Spotify could turn its app into a radio station, but then it wouldn't be Spotify as we know it and would resemble streaming radio from the late 90's. 

    With respect to apple's profits. It's actually pretty surprising that they're willing to offer the service for the little profit it actually yields. Handing over $7 for every $10 subscription is generous to both the content providers and Apple's customers especially considering the resources they have to allocate to make those streams available. Most companies would make you pay a subscription AND listen to ads. 
    repressthislostkiwicommand_fbadmonkcornchipredgeminipabaconstangmagman1979indyfxjony0
  • Reply 5 of 36

    Rayz2016 said:

    Does this scenario give anyone a sense of déjà vu?

    My tuppence worth of advice to Apple: drop this – now.

    I can see your point, but I don't think so. Apple still charges more than Amazon for their books and still pays out more and as a a result have much better content. More to the point though, the oversight has been removed and I think the Feds are the ones slinking back into a corner after they embarrassingly had to admit they were wrong. I don't think they'll be so quick to do it again. They tend to step in when industry cries foul and not so much when consumers are feeling ripped off.  It takes a sea of change for the consumers voice to be heard, but when money talks... Well you know. 
    cornchipredgeminipabaconstangjony0lolliver
  • Reply 6 of 36
    Props to AI for mentioning this is only one submission by Apple, and that other industry players (including Spotify) also get to make theirs.

    Everyone else is leaving this out implying that Apple is trying to force their agenda onto every music provider.
    lostkiwicommand_fredgeminipaai46baconstangmagman1979pscooter63latifbprob53lolliver
  • Reply 7 of 36
    ppietrappietra Posts: 171member
    Rayz2016 said:
    I have two questions.

    Number one: does Spotify pay any of its advertising royalty to the artists who are streamed on their free tier?

    Number two is not really a question, more of a scenario: Apple proposes a new royalty scheme that will pay artists more money. They adopt it and the music industry rejoices. Following a few anonymous complaints, the guv'mint decides that since the music industry are all giving more exclusives to Apple then something fishy is going on. They sue Apple and the music industry. The music industry settles and slinks off to a corner, leaving Apple to carry the can. A judge declares Apple guilty before the trial has begun, and so the company loses and has to put up with a court-appointed monitor who bills them millions while doing nothing, and Apple also ends up paying a massive fine. 

    Does this scenario give anyone a sense of déjà vu?

    My tuppence worth of advice to Apple: drop this – now.

    did you read the first line?
    "submitted a proposal to the U.S. Copyright Royalty Board"
    It is the Government that will decide the 
    Royalty scheme
    cornchipbaconstangmagman1979lollivermike1
  • Reply 8 of 36
    bellsbells Posts: 122member
    RickeyP21 said:
    Poor Apple. "Only" making $45 million per year for playing someone else's content. However do you stay in business with your over priced laptops and $800 iPhone sales. I know, why don't you screw over music fans everywhere and force them to pay your over priced fees instead of using better products like Spotify!
    Free was never the model. Radio Stations, restaurants and bars all pay royalties.




    Not not entire true. Traditional radio stations generally do not pay royalties. It depends on what type of media they play. They were exempt under the copyright act. Streaming ones do.  Streaming ones aren't because they weren't around when the original act was passed.
  • Reply 9 of 36
    singularitysingularity Posts: 1,329member
    If anyone thinks the artists will get more from this proposal is living in cloud cuckoo land.

  • Reply 10 of 36
    I really enjoy Apple Music and give Apple credit for trying to up the ante for artists, but the term "flat" is not necessarily a positive one when it comes to payment schemes...similar to "flat" taxes.
    latifbp
  • Reply 11 of 36
    gatorguygatorguy Posts: 20,282member
    bells said:
    RickeyP21 said:
    Poor Apple. "Only" making $45 million per year for playing someone else's content. However do you stay in business with your over priced laptops and $800 iPhone sales. I know, why don't you screw over music fans everywhere and force them to pay your over priced fees instead of using better products like Spotif
    Free was never the model. Radio Stations, restaurants and bars all pay royalties.




    Not not entire true. Traditional radio stations generally do not pay royalties. It depends on what type of media they play. They were exempt under the copyright act. Streaming ones do.  Streaming ones aren't because they weren't around when the original act was passed.
    They still pay royalties but via ASCAP. BMI and SESAC. That means tho that it's primarily a songwriter who monetarily benefits from radio play, considered a "public performance", rather than the singer or owner of that recording.
    command_fbaconstangpscooter63latifbp
  • Reply 12 of 36
    Here's where Spotify loses out in competition with Apple if Apple gets everyone (copyright holders, at least) to agree to higher royalty rates across the board:

    Apple doesn't need to make any money on the music itself, as it makes money on the hardware used to play it, and the whole Halo Effect.

    Apple's best business move would be paying a rate that keeps a neutral financial gain from the music royalties versus sales alone, assuming the government doesn't decide even that's too aggressive due to using their other strengths to leverage their rates.
    command_fcaliredgeminipalolliver
  • Reply 13 of 36
    command_fcommand_f Posts: 289member
    Apple's suggestion seems like a step in the right direction. It's not sustainable to effectively give music away (ie literally free or paying a tiny amount). Someone has to pay the artists and for all the facilities (recording studios, agents [who curate the content for us] etc). It doesn't cost nothing so it can't earn nothing.

    You know, I always worry about defending the music industry (not the artists) since they're so bad at managing their own business but they do have a right to be paid fairly. When the iTunes Store was created, industry leaders allegedly asked Steve Jobs why they needed Apple - Jobs replied "because you'd only f*** it up". Jobs was right and perhaps Apple can help save the industry from itself again.
    redgeminipabaconstangpscooter63latifbplolliver
  • Reply 14 of 36
    rogifan_newrogifan_new Posts: 3,825member
    The business sucks for a lot of artists. These days the money to be made comes from tours and merchandise. But only big name acts benefit as they're able to charge the big bucks for all this stuff. 
    baconstangzeus423
  • Reply 15 of 36
    Mac rumors readers are so ignorant. Look at the comments in the article they posted about this.
    magman1979nolamacguylolliver
  • Reply 16 of 36
    zimmermannzimmermann Posts: 215member
    Mac rumors readers are so ignorant. Look at the comments in the article they posted about this.
    Well, explain yourself...
    cornchiplatifbp
  • Reply 17 of 36
    I wonder if this has anything to do with the rumored Tidal aquisition...  Tidal was founded on the premise of high quality streaming but also fair compensation for the artists.  I'm holding out hope that Apple will expand their catalog by buying Tidal and also offer content in the MQA format.
  • Reply 18 of 36
    danuffdanuff Posts: 26member
    Oh goodie....This proposal will REALLY kill small Internet radio stations....ASCAP has already, but this will put the nail in the coffin.
  • Reply 19 of 36
    logic2.6logic2.6 Posts: 34member
    I really enjoy Apple Music and give Apple credit for trying to up the ante for artists, but the term "flat" is not necessarily a positive one when it comes to payment schemes...similar to "flat" taxes.
    For decades, publishing payments (mechanical royalties, radio) were made on a fixed rate basis tied to volume. That - if you believed sampling was accurate - created a level playing field whether you were Michael Jackson or Maspyke.

    Nowadays, digital streams can be measured perfectly (accurate reporting is another story). 'Flat' as used in the article only refers to eliminating carve outs so that every stream is accounted and paid for. That's fair.

    This is only done for statutory licenses - ie. the copyright owners can't stop anyone who is willing to pay the statutory minimum from using the music. Whether statutory licenses should apply to digital streams is a big question.  Any musician/rights owner who wanted to license for less than the statutory minimum is free to do so (this is where competition is important so a big company doesn't arm twist desperate artists into receiving less than the statutory minimum). 
    baconstanglolliver
  • Reply 20 of 36
    gunner1954gunner1954 Posts: 140member
    Rayz2016 said:
    I have two questions.

    Number one: does Spotify pay any of its advertising royalty to the artists who are streamed on their free tier?

    Number two is not really a question, more of a scenario: Apple proposes a new royalty scheme that will pay artists more money. They adopt it and the music industry rejoices. Following a few anonymous complaints, the guv'mint decides that since the music industry are all giving more exclusives to Apple then something fishy is going on. They sue Apple and the music industry. The music industry settles and slinks off to a corner, leaving Apple to carry the can. A judge declares Apple guilty before the trial has begun, and so the company loses and has to put up with a court-appointed monitor who bills them millions while doing nothing, and Apple also ends up paying a massive fine. 

    Does this scenario give anyone a sense of déjà vu?

    My tuppence worth of advice to Apple: drop this – now.

    The difference is that Apple isn't going it alone this time, as it did when it 'coerced' publishers to give them certain seller's rights. This time Microsoft, Spotify and a bunch of other companies are also submitting proposals. Apple isn't 'arm-twisting' the USCRB into accepting any one proposal or coming up with some sort of compromise.
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