Just as we thought Apple’s u-turn would put an end to the controversy over its original intention to pay artists nothing during the free trial of Apple Music, a statement to the WSJ suggests that there is still time for the saga to turn into a PR nightmare.
While everyone assumed Apple would now be paying artists and publishers the 71.5% royalty rate from day one, it appears the actual amount paid during the free trial will be lower.
Apple declined to say how much it plans to pay during the trial period, though it said the rate will increase once customers start paying for subscriptions.
Eddy Cue’s tweets in response to Taylor Swift’s open letter said only that Apple “will pay artist for streaming” and “will always make sure artists are paid,” stopping short of promising to pay the full royalty rate from day one …
Existing streaming music services like Spotify pay a lower royalty percentage during promotional periods. For example, during a Spotify promotion where subscribers pay just 99 cents for the first three months, the WSJ says Spotify pays artists 35% rather than 70%. If Apple took the same approach, reducing its standard royalty rate by half, it would be paying 35.75% during the free trial – or even less if it mirrored Spotify’s terms for its free tier.
The complication here is that the actual calculations needed to arrive at the 71.5% can’t be done until Apple has paying customers. The way the 71.5% royalty will work for paid subscriptions is like this:
- Apple totals up the subscription revenue each month
- It allocates 71.5% of that sum into a pot of money for royalties
- It divides that pot by the total number of tracks played to get a per-listen sum
- Then multiplies the per-listen sum by the number of listens each artist got, and pays them that sum
Since Apple has no way to know what the total subscription revenue will be, it will either have to estimate this up-front, or back-calculate royalties for the three-month trial once it is over.
An earlier calculation had suggested that the extra 1.5% Apple was offering above the industry-standard royalty to compensate for the three-month free trial would have taken eight years to pay off.
The math there was very simplistic, however – including the assumption that having the free trial wouldn’t result in any additional paid subscribers, which is obviously not going to be the case.
Apple has only a short time left to agree revised terms with artists before Apple Music launches on 30th June via an all-new Music app,