Apple Music is making claims about what it pays artists. Let’s take a more in-depth look.

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Apple Music made a splash on Friday (April 16) when it made some proud claims about its payouts to artists and songwriters – and, as associated, some potentially damaging claims about Spotify’s equivalent distributions.

These claims all surfaced in an email newsletter Apple sent out to the industry and the artist community. This newsletter has now been received from MBW and will be republished below.

Apple doesn’t specifically mention Spotify at all in the letter, although you would not have guessed it from subsequent media coverage.

This is especially true of certain headlines related to Apple’s claim, “Our average rate per game is $ 0.01.”

The Wall Street Journal published the story of Apple’s letter on Friday, stating in its report that: “Apple’s penny-per-stream payment structure … is roughly twice that of Spotify … music rights holders per stream.”

That setting (and it’s a setting that has made headlines in many other media outlets) should have a neon-lit caveat: No major streaming service in the world actually pays per stream.

Instead, recorded music payouts from Spotify and Apple Music are broadly determined using this two-step method:

  • (i) A service identifies a total pool of royalties that is calculated as a percentage of its net income for that month. The percentage of this revenue share was previously agreed with labels and / or distributors.
  • (ii) This license pool is then split up and paid out to labels and their artists based on their market share in streaming volume.
  • Example: If Universal Music Group claimed 40% of all games on Apple Music for a month and UMG had agreed a 35% net revenue share, Apple Music would pay Universal Music Group 35% of 52% of its net revenue for the month period.

The comparison of how such a payout per stream works is therefore problematic for one reason in particular: There is a risk that platforms with lower audience engagement appear more generous towards artists / labels and services with higher audience engagement appear less generous.

In other words, if music fans stream more on a service in a given month, the payout per stream will decrease. If music fans stream less in a given month, the rate per stream goes up.

Let’s get back to what Apple actually wrote in the letter, rather than arguable interpretations.

Below is the full letter from last week’s Apple Music.

To combat some of the misinformation flying around, MBW added our own comment to make Apple’s claims clearer.

One particularly interesting thing about Apple Music’s letter is that the platform suggests considering the possibility of pursuing SoundCloud with a user-centered / “fan-driven” royalty payout model, but concludes that doing so will result in “limited redistribution of.” Royalty fees with varying effects “would lead to artists”.

Another important issue: Apple claims it pays royalties to every record label based on exactly the same revenue share rate (52%). However, it’s also suggested that other leading streaming services (guess who?) Pay different prices for different labels – with majors getting higher value than some indies.

Read the Apple newsletter completely again – with the additional comment from MBW in red – and decide for yourself.

Apple Music’s Latest Newsletter: Part One

Part of a new series of newsletters, this update examines how developers earn royalties on Apple Music and how they have grown over time.

We believe in the value of music and pay the creators fairly for their work. Since we launched the iTunes Store in 2003, we’ve helped millions of artists and songwriters make a living from music. As the discussion about streaming royalties continues, we feel it is important to share our values. We believe that every creator gets the same price, that a piece has value, and that the creator never has to pay for the game.

We pay all labels the same headline rate of 52%.

While other services pay a much lower rate to some independent labels than large labels, we pay the same headline rate to all labels. This means that artists can distribute music however they want, knowing that Apple Music pays the same price. Sign with a label or be independent; We believe in the value of all music.

We pay the same headline price for all compositions.

Without a songwriter there would be no recordings. For this reason, we have paid the same headline tariff to every publisher and licensor in every country. That’s why we’ve invested millions streamlining the publishing processes and making sure songwriters get paid as soon as possible.

Take MBWs: A revelation from this part of the letter is that Apple has now publicly acknowledged that it will pay 52% of net sales to recorded music rights holders (“all labels”).

This is exactly the same share of net sales that Spotify pays to the big labels today. Spotify renegotiated the headline rate from 55% to 52% in 2017. Apple Music appears to have done the same in its final round of negotiations, which fell that same year.

(Payments to music publishers and songwriters add to that 52% share. Overall, they tend to make up another 10-13% of net sales for each service. However, Spotify is currently demanding a rate increase for publishers and songwriters in the US, alongside Amazon, Google, and SiriusXM Apple Music has refused to address this surge.)

Apple’s main argument in the section above is that an MBW will look at it again: other leading streaming services don’t offer all labels, independent or large, a simple net sales percentage.

In the case of Spotify, we hear that this is a complicated situation. Some indies claim they are getting a lower effective (rather than a headline) rate than 52% due to certain contractual discounts and discounts.

Apple Music’s Latest Newsletter: Part Two

Our average rate per game is $ 0.01.

While streaming service royalties are charged on a stream-share basis, a game still has value. This value varies by subscription and country, but averages $ 0.01 for individually paid Apple Music plans in 2020. This includes license fees for labels and publishers.

We do not pay a lower license fee in return for the presentation.

Apple Music’s global flavor makers team hand-craft 30,000 editorial playlists. These tastemakers select music based on merit and we are not asking anyone to accept a lower royalty in exchange for the presentation. The same goes for Apple Music’s personalized playlists and algorithmic recommendations.

Take MBWs: We covered the question of why a rate per game can be misleading earlier in this article, but there are a few other things that should be mentioned here.

First, Apple carefully made sure that $ 0.001 per stream is the average payout from the stream Individually Paid plans – which means the discounted packages (like the family subscription for $ 14.99 per month for up to six people, or the Apple One multimedia subscription or the student subscription for $ 4.99 per month) are not taken into account .

Second, Apple included both label and publisher license fees in that $ 0.001 per stream figure, which further complicates the picture. Remember: the 52% headline rate mentioned in the first section of the Apple Music newsletter only applies to labels / recorded music.

Perhaps more interesting than all of this: Apple’s “We don’t pay a lower royalty in return for the presentation” line is a clear attack on Spotify’s Discovery Mode feature, which allows artists and labels to accept reduced royalties to do better the frequency of their tracks shown on Autoplay and Spotify Radio.

Apple has its cheerleaders on this point. Last month, some of the world’s largest indie labels co-signed a 10-point plan from the retail organization IMPALA, in which certain streaming services were offered as “privileged treatment of algorithms or other functions” for commercial purposes. IMPALA wrote, “This is Payola and has no legitimate place in improving viability and opportunities for the Creators.”

Apple Music’s Latest Newsletter: Part Three

Because of our commitment to these values, Apple Music paid royalties to more than 5 million recording artists around the world in 2020, more than 1 million more than in 2019. The number of recording artists whose catalogs are recording and publishing royalties of over $ 1 million annually generated has increased over 120% since 2017, while the number of recording artists whose catalogs generated over $ 50,000 annually has more than doubled.

Like others, we’ve looked at alternative royalty models. Our analysis has shown that they would result in a limited redistribution of royalties with varying effects on artists. The rate per game would no longer be the same for every game of a song. More importantly, the changes don’t increase what all developers earn from streaming. Instead, these changes would shift royalties to a small number of labels and provide less transparency for creators everywhere.

At Apple Music, we continue to focus on artists and songwriters, looking for new and innovative ways for all creators to make a living from music. With Apple Music, music fans around the world enjoy an uninterrupted ad-free experience while knowing that their data will remain private and will only be used to enhance the overall music experience for them.

Take MBWs: Apple’s numbers here provide a useful comparison with Spotify, whose new Loud & Clear website recently revealed: The number of recording artists whose catalogs generated licensing fees for recording and publishing in excess of $ 1 million per year for their service , increased by 90% from 2017 to 2020.

Apple obviously says its equivalent percentage is higher on its platform (+ 120%).

That being said, Apple Music hasn’t given us a public update on its global subscriber numbers since June 2019, when Eddy Cue announced it was just over 60 million (including paid triallists). Spotify, which unlike Apple Music, benefits from using an ad-supported (“free”) tier used as a “funnel” for upselling users to Premium, had 155 million at the end of 2020.

At the time Eddy Cue made this announcement, Apple Music’s global subscriber base was growing by roughly a million each month. If it continued like this it would be around 80-85 million submarines today.

Also, let’s not do a key stat slip here. Apple said it paid royalties to over 5 million artists last year – a number up over a million in 2020 from 2019.

It is clear that the DIY artist explosion is not showing any signs of slowing on any of the leading streaming platforms.Music business worldwide

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