Report claims Apple Music pays more to record labels in royalties per stream than Spotify

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in iPod + iTunes + AppleTV edited January 2017
Record labels are getting a better deal on streaming music royalties with Apple than major rival Spotify, according to a report, with Apple Music streaming rates claimed to be nearly double what is paid out by its main competition.




Research published by artist rights blog The Trichordist advises Apple paid out an average of $0.00735 per song stream in 2016, compared to Spotify's $0.00437 per stream figure.

Spotify's figures for 2016 are in fact down from a similar report issued in 2014, when it paid out a more generous average per-stream rate of $0.00521, a two-year drop of 16 percent.

The data is sourced from an unnamed "indie label" with a music catalog of approximately 150 albums available to stream. It is claimed the sample is made up of over 115 million streams across all services, with all royalties calculated at a gross rate before distribution fees are removed.

Apple Music is considered to be in a "sweet spot" on the chart because of its streaming rate, providing 13.35 percent of all streaming revenue in the sample with 7.18 percent of the streaming quantity total. By comparison, Spotify generated 69.57 percent of the revenue from 62.97 percent of streams in the measured period.

Spotify's low revenue figure might be attractive to potential investors awaiting the music service's IPO, thought to take place sometime this year, but record labels and artists would rather the royalty rate increase closer to its rivals. An increase in royalties will put extra pressure on the company's finances, which has seen the company endure yearly net losses, as well as weakening the IPO.

Apple's recommendation to the Copyright Royalty Board to adopt a flat royalty rate may add additional pressure to Spotify, if ratified. A flat royalty per stream could make Spotify's advertising-supported free tier too expensive to sustain, even if supported by revenues generated from subscribed users.

Google's two services, Google Play Music and YouTube, take the third and fourth places on the chart when ordered by revenue share. Google Play Music offers an average streaming rate closer to Apple Music, at $0.00676 per stream, generating 4.03 percent of measured revenue from 2.36 percent of streams.

YouTube is shown to be one of the most inefficient streaming revenue sources on record, generating 3.81 percent of revenues from a high 21.7 percent of streams due toan extremely low $0.00069 average revenue rate per stream. The video streaming site appears in the list due to it having a licensed subscription service called YouTube Red, but it is unclear if advertising-supported videos from non-subscribers are included in the figures or just subscribed users.

The report notes the top ten streaming services account for 97.82 percent of all streams, and generates 99 percent of overall revenues. Other services listed in the top ten include Deezer, Rhapsody, Xbox Music, Amazon, Tidal, and Telecom Italia.
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Comments

  • Reply 1 of 27
    What I don't get is that the record companies could put Spotify out of business over night by demanding a higher rate. And if they don't pay they are done. Gone. You can argue that people will then 'steal' music, but there are other plans out there and if they pay more if I were the record companies I'd lower the boom on spotify. I can't seem them having any leverage in such a situation.
    caliwatto_cobra
  • Reply 2 of 27
    lkrupplkrupp Posts: 7,162member
    MnMark said:
    What I don't get is that the record companies could put Spotify out of business over night by demanding a higher rate. And if they don't pay they are done. Gone. You can argue that people will then 'steal' music, but there are other plans out there and if they pay more if I were the record companies I'd lower the boom on spotify. I can't seem them having any leverage in such a situation.
    I’m thinking the record companies want to keep a tight leash on Apple in order to avoid what happened when they got run over by Apple in the early days of iTunes. Yes, if this report is true they could kill Spotity any time they want but do they really want to do that?
    jahblade
  • Reply 3 of 27
    lukeilukei Posts: 332member
    Why on Earth would the labels want to kill Spotify? I'm guessing you are not involved in any form of commercial work?
    edited January 2017 singularity
  • Reply 4 of 27
    wigginwiggin Posts: 2,265member
    MnMark said:
    What I don't get is that the record companies could put Spotify out of business over night by demanding a higher rate. And if they don't pay they are done. Gone. You can argue that people will then 'steal' music, but there are other plans out there and if they pay more if I were the record companies I'd lower the boom on spotify. I can't seem them having any leverage in such a situation.
    I don't know what percentage of Spotify users are subscription vs ad-supported, but if they make the ad-supported option not viable, how many of those customers will start paying for a subscription, whether from Spotify, Apple, or some other service? If a large number are ad-supported, and only a small portion of them would be willing to switch to subscription, you could end up losing money in the long run.
    edited January 2017
  • Reply 5 of 27
    qwweraqwwera Posts: 276member
    If this is verified good for Apple and I will swiftly cancel my subscription to Spotify and switch over to Apple Music.
    lostkiwiadmiral.ashikwatto_cobra
  • Reply 6 of 27
    I wonder if that headline might be rewritten based on total royalties paid (e.g., Spotify Pays More Artist Royalties than Apple Music). Now, I don't know if this is fact – but readers of all news sources need to ask questions and pay attention to how wording creates an editorial slant right from the get-go. And if Spotify royalties make up a significant percentage of all royalties, then you could say they use their clout to negotiate royalty rates. It would also give record companies a big disincentive to "lower the boom" on Spotify.
  • Reply 7 of 27
    calicali Posts: 3,495member
    Something is obviously wrong. What a mess.

    Youtube isn't helping at all. Almost all teens stream free and though illegal uploads. 
    irelandjahbladelostkiwiadmiral.ashikwatto_cobra
  • Reply 8 of 27
    irelandireland Posts: 17,645member
    The ad-supported model needs to go away or the industry is going 6-feet under.
    watto_cobra
  • Reply 9 of 27
    cali said:
    Something is obviously wrong. What a mess.

    Youtube isn't helping at all. Almost all teens stream free and though illegal uploads. 

    This. And not just teens. Google likes to pretend they're doing something about copyright infringement on YouTube but they're not. The few people I know who use YouTube as their music/movie player all say the same thing: I can find whatever music or shows I want. If YouTube takes it down then someone else puts up another one. It's always available from somebody. 
    edited January 2017 qwwera[Deleted User]watto_cobra
  • Reply 10 of 27
    bitmodbitmod Posts: 267member
    qwwera said:
    If this is verified good for Apple and I will swiftly cancel my subscription to Spotify and switch over to Apple Music.
    Good luck with that.
    If you want to go by an 'unnamed indie label' with a measly 150 albums .

    Their alternative is nobody ever hears about them ever or they can fork out tens of thousands to make cd's - which nobody buys anymore - tens of thousands more to market and distribute those cd's. To get what? 30 cents/disc.

    There are some songs i've streamed over 100 times. The artist gets .73 cents for that.
    I can think of one artist who's 9 track album I have streamed well over 100 times. Thats $6. $6 they otherwise would never have had. I've turned many friends on to this artist as well.  So they have made a lot of money they otherwise would never have had with minimal investment and beholden to a record label for 6 years...
  • Reply 11 of 27
    lukeilukei Posts: 332member
    ireland said:
    The ad-supported model needs to go away or the industry is going 6-feet under.
    This industry which makes >85% of artist revenue from live and merchandise. Where recorded music is used to promote those rather than the reverse situation as it was 20 years ago?
  • Reply 12 of 27
    gatorguygatorguy Posts: 20,894member
    bitmod said:
    qwwera said:
    If this is verified good for Apple and I will swiftly cancel my subscription to Spotify and switch over to Apple Music.
    Good luck with that.
    If you want to go by an 'unnamed indie label' with a measly 150 albums .

    Their alternative is nobody ever hears about them ever or they can fork out tens of thousands to make cd's - which nobody buys anymore - tens of thousands more to market and distribute those cd's. To get what? 30 cents/disc.

    There are some songs i've streamed over 100 times. The artist gets .73 cents for that.
    I can think of one artist who's 9 track album I have streamed well over 100 times. Thats $6. $6 they otherwise would never have had. I've turned many friends on to this artist as well.  So they have made a lot of money they otherwise would never have had with minimal investment and beholden to a record label for 6 years...
    Song streaming payouts don't work the way you and some others here believe they do. The pot of money is fixed, so as the number of songs streamed by you goes up the payout per stream from your subscription goes down. Always remember that a fixed 70% of your Apple Music subscription (which seems to be an industry standard now) is used to pay the owners and songwriters for every song you streamed, and even then may not be and often aren't the artist/performer. There is not a guaranteed payout per play, they all take a share of a fixed percentage of the pot. The only ones guaranteed a big chunk of your subscription every month is the company providing the streaming. 

    https://thetrichordist.com/2014/11/12/the-streaming-price-bible-spotify-youtube-and-what-1-million-plays-means-to-you/
    edited January 2017
  • Reply 13 of 27
    foggyhillfoggyhill Posts: 4,767member
    bitmod said:
    qwwera said:
    If this is verified good for Apple and I will swiftly cancel my subscription to Spotify and switch over to Apple Music.
    Good luck with that.
    If you want to go by an 'unnamed indie label' with a measly 150 albums .

    Their alternative is nobody ever hears about them ever or they can fork out tens of thousands to make cd's - which nobody buys anymore - tens of thousands more to market and distribute those cd's. To get what? 30 cents/disc.

    There are some songs i've streamed over 100 times. The artist gets .73 cents for that.
    I can think of one artist who's 9 track album I have streamed well over 100 times. Thats $6. $6 they otherwise would never have had. I've turned many friends on to this artist as well.  So they have made a lot of money they otherwise would never have had with minimal investment and beholden to a record label for 6 years...
    You seem to not know any artist in the industry to be saying such things. They made fuck all no money; your talking a lot of times of bands with up to 3-8 people.

    Streaming is good for totally unknown bands with guys not depending on that to live on (second job) to get known, but once they get well known and have mid level success it is a totally losing proposition.

    Those mid level success bands could live from touring once in a while, but now need to tour constantly (which is impossible), to get to not even close to the kind of money they had before at their peek. Bigger bands are mostly unviable as sole means of making money for all but a short period of peek fame (1-3 years).


    lostkiwi
  • Reply 14 of 27
    fracfrac Posts: 480member
    I can believe this. I also remember reading a ZdnetUK article that said Apple paid up promptly in full, to the record labels for iTunes track sales which meant the artists potentially got paid sooner. Keyword 'potentially'. 
  • Reply 15 of 27
    foggyhillfoggyhill Posts: 4,767member
    lukei said:
    ireland said:
    The ad-supported model needs to go away or the industry is going 6-feet under.
    This industry which makes >85% of artist revenue from live and merchandise. Where recorded music is used to promote those rather than the reverse situation as it was 20 years ago?
    Most of that money is made by the top 10% of artist and it requires constant touring for mid level bands to equal what they used to do with much less stringent touring or local bookings.

    A lot less artist can actually live well from their music these days than before. I know quite a few artist (solo and band) for the last 25 years (a friend of my sister is in the industry as a singer, songwriter and producer) and it has now become very hard to pay the bills.



  • Reply 16 of 27
    One figure I found an bit surprising on the linked article was the market share columns. 
    They reckon Spotify has a 69% market share - and Apple Music has something like 13%?

    I find that a little hard to believe. 
  • Reply 17 of 27
    KT GlitzKT Glitz Posts: 1unconfirmed, member
    It's not surprising to be honest. I am a musician and I receive more in royalties per play through Apple than I do through Spotify. Spotify are the worst company for offering the best deal to the people they are giving a platform to so I can well believe that the record labels also get a bad deal. There is NO defence for Spotify to be ripping off musicians and labels when Apple can give a far better deal. Spotify are feeling the pressure now from the place where they once had an exclusive platform to do what they want but if they don't wise up then they are going to struggle. The actual figure that Spotify pay per stream is between $0.006 and $0.0084 so you have to have a massive amount of streams to get any return as an artist!
    edited January 2017
  • Reply 18 of 27
    lostkiwi said:
    One figure I found an bit surprising on the linked article was the market share columns. 
    They reckon Spotify has a 69% market share - and Apple Music has something like 13%?

    I find that a little hard to believe. 
    That seems a little off to me as well.

    Going by the reported paid subscribers numbers that we've seen, and when the respective services supposedly hit various paid subscriber levels, it seems that Spotify would have averaged about twice as many paid subscribers for the whole year - perhaps a bit more. But you also have to account for the revenue generated by people using the free, ad-supported, Spotify service. What would that push the revenue ratio up to? 3 to 1 maybe? It's hard to say, but I wouldn't expect it to be 5 to 1.

    There are other possible reasons for the disparity. For instance, it could be that Spotify subscribers tend to listen to the artists on the indie label they got this data from more than Apple Music subscribers do. I assume that all of the albums on this indie label are available to stream through both services, otherwise they should have made mention of the fact that they weren't. But it could still be that Apple Music subscribers tend to have a bit different taste in music or different kinds of music tend to be promoted more on one service or the other or their discovery / recommendation algorithms differ enough to cause certain artists to see a higher portion of the streams on one service than they do on the other. That shouldn't affect the per-stream average payout calculations , but it could affect how well the revenue share and stream share numbers (for this indie label) line up with what's going on overall. 
  • Reply 19 of 27
    gatorguygatorguy Posts: 20,894member
    KT Glitz said:
    It's not surprising to be honest. I am a musician and I receive more in royalties per play through Apple than I do through Spotify. Spotify are the worst company for offering the best deal to the people they are giving a platform to so I can well believe that the record labels also get a bad deal. There is NO defence for Spotify to be ripping off musicians and labels when Apple can give a far better deal. Spotify are feeling the pressure now from the place where they once had an exclusive platform to do what they want but if they don't wise up then they are going to struggle. The actual figure that Spotify pay per stream is between $0.006 and $0.0084 so you have to have a massive amount of streams to get any return as an artist!
    Both Apple and Spotify claim to be paying out 70% of their streaming revenues back to the IP owner. As I read it the difference in the per-stream figures between the two companies is not  one is willing to pay more but that the number of streams per Spotify subscriber is greater than the number of streams per Apple subscriber. Both paying the same 70% out (Apple may still be paying 71% but I don't think so) but on a different number of plays. 

    "All numbers are the result of taking the total amount of revenue and dividing it by the total number of streams to produce a net rate per stream. As streaming rates vary (based upon revenue vs consumption) this is the only real way to have a reasonable benchmark. Spotify pays out (they say) 70% of (recognized?) revenues to rights holders. The more streams there are, the less each stream is worth, unless the revenues grow faster than streaming consumption. But that hasn’t happened yet."
    edited January 2017
  • Reply 20 of 27
    davidwdavidw Posts: 975member
    gatorguy said:
    KT Glitz said:
    It's not surprising to be honest. I am a musician and I receive more in royalties per play through Apple than I do through Spotify. Spotify are the worst company for offering the best deal to the people they are giving a platform to so I can well believe that the record labels also get a bad deal. There is NO defence for Spotify to be ripping off musicians and labels when Apple can give a far better deal. Spotify are feeling the pressure now from the place where they once had an exclusive platform to do what they want but if they don't wise up then they are going to struggle. The actual figure that Spotify pay per stream is between $0.006 and $0.0084 so you have to have a massive amount of streams to get any return as an artist!
    Both Apple and Spotify claim to be paying out 70% of their streaming revenues back to the IP owner. As I read it the difference in the per-stream figures between the two companies is not  one is willing to pay more but that the number of streams per Spotify subscriber is greater than the number of streams per Apple subscriber. Both paying the same 70% out (Apple may still be paying 71% but I don't think so) but on a different number of plays. 

    "All numbers are the result of taking the total amount of revenue and dividing it by the total number of streams to produce a net rate per stream. As streaming rates vary (based upon revenue vs consumption) this is the only real way to have a reasonable benchmark. Spotify pays out (they say) 70% of (recognized?) revenues to rights holders. The more streams there are, the less each stream is worth, unless the revenues grow faster than streaming consumption. But that hasn’t happened yet."


    But you have to remember that that 70% of the pot is not a constant just based on the number of subscribers. If Apple has 20M subscribers but each subscriber pays and average of $9.00 and Spotify has 30M subscribers but each subscriber pays an average of $6.00, the pot would be the same for each company (70% of $180M). (Which can happen due to how many subscribers are in family plans or paying student discounts.) But Spotify would have 10M more people streaming. So its not just the number of streams per subscriber that affects the per stream pay out rate to the Music Labels, its also the amount each subscriber pay for their subscription.  If each Apple subscriber stream at the same rate as each Spotify subscriber, Apple would end up paying more per stream than Spotify (based on this scenario). And subscribers with student discount or under a family plan would be paying out less per stream than a single subscriber paying regular subscription cost, if they all stream at the same rate.    
    edited January 2017
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