Apple Music to pay rights holders on a per-stream basis during three-month free trial

“I just got off the phone with Eddy Cue,” Peter Kafka reports for Re/code.

“Cue says Apple will pay rights holders for the entire three months of the trial period,” Kafka reports. “It can’t be at the same rate that Apple is paying them after free users become subscribers, since Apple is paying out a percentage of revenue once subscribers start paying. Instead, he says, Apple will pay rights holders on a per-stream basis, the amount of which he won’t disclose.”

“Cue says he doesn’t know if the changes will be enough to get Swift to put “1989” on Apple Music. He also says that wasn’t his reasoning for the change,” Kafka reports. “Cue says he hasn’t talked to any other musicians, labels or publishers yet. Apple will keep the existing royalty rates it has already hammered out with the three major music labels for subscribers, he says.”

Read more in the full article here.

“It’s unclear if Apple can actually pay the rights during this trial period and not get targeted by competitors for predatory pricing or anti-competitive behavior. A company who has a big cash hoard can’t price something so low that others can’t match it, in order to unfairly compete with them. In some countries, it’s illegal to sell anything at a loss, and Apple will be clearly doing that during these free trials,” Kirk McElhearn writes for Kirkville. “Imagine a small streaming service, such as Tidal, which now has to compete with a free service for three months; they can claim that they’re losing money because of Apple’s cash hoard. (And they may be right) … the solution, with Apple paying for these streams, may end up being a Trojan horse that can lead to regulatory authorities investigating Apple’s plans.”

McElhearn writes, “I’m waiting to see what Spotify has to say, whether they’ll claim that Apple is being anti-competitive. And that Mr. Z from Tidal, who has been claiming that there is a conspiracy against his service… Apple is treading a fine line here, one that may lead to more problems than just angry musicians.”

Read more in the full article here.

MacDailyNews Take: Apple can now claim they did not plan any of this. They had deals in place to stream without paying for the trial period. So, there was no collusion here. They simply did the right thing, thanks to Taylor Swift.

If you think the dominant leader in paid music download sales made a mistake that had to be rectified thanks to Taylor Swift a week before launching a high profile music subscription service, we have an absolutely beautiful bridge for sale in Brooklyn, cheap!

Legality is one thing, PR is another.

What’re Spotify et al. going to do, whine that it’s unfair that Apple is paying the artists* and complain that they’ll have to pay them now, too? The other streaming music services will lose that argument with the artists and with the paying public. Spotify and the rest are between a rock and a hard place.

*in effect, Apple is actually paying the labels who then pay out some percentage of that to the artists.


Taylor Swift wins streaming battle as Apple backs down on royalty payments – June 22, 2015
Apple responds to Taylor Swift, indie label complaints; will pay royalties during Apple Music 3-month free trial – June 22, 2015


    1. Pretty sure it ends on Sept 30. Apple is trying to jump-start the use of the service. The other approach would be a payments processing nightmare and I’m pretty sure it’s just wishful thinking.

  1. …and there’s the other side of that coin: predatory behaviour.

    Whether we like it or not, Apple is now the largest company in the world. With $160B (as in billion) in the bank, it has an immense might. Every single most insignificant move is carefully monitored.

    And I have no doubt, now that they are paying royalties, there is no doubt that we’ll get very swift anti-trust scrutiny. This is Microsoft giving Internet Explorer away for free (“cutting off the oxygen supply from Netscape”, as Ballmer had put it back then 20 years ago). About the only mitigating factor may be their initial intent not to pay the artists while the service was free. And even so; offering free service against the competition that charges for similar service can easily be seen as anti-competitive.

    Realistically, it would be very difficult to get Apple on anti-trust violations. FIrst, they would need to be proven as a monopoly in any one market space, the way Microsoft was in desktop computing. Then, even if they proved Apple to hold monopoly somewhere (for example, music download business, or mobile phone business), they would have to prove that Apple leveraged that monopoly in order to grab market share in another specific market space (such as streaming music) away from competitors.

    I’m not sure what exactly constitutes monopoly position, and what percentage number represents that threshold: 75%? 80%? 90%? More? Regardless, there is no way anyone can massage the statistical data in mobile devices (or music downlodas) markets so much that they end up showing Apple holding anything even resembling a monopoly position in any conceivable market space. About the only place they have the monopoly is in devices running iOS (or Mac OS, for that matter). Clearly, that cannot be called a complete market space by any definition.

    1. In America, this shouldn’t create major legal problems (just nuissances). Monopoly is not illegal; abusing monopoly position is (i.e. leveraging monopoly in one market space to push out competitors in another) is.

      However, outside of America, there are many jurisdictions where ‘dumping’ is against the law, and you cannot price your product significantly below the wholesale value of it (or worse, offer it for free). In other words, there are no circumstances under which you could offer anything of actual value for free (unless you find a way to monetize it elsewhere, such as through placement of third-party advertising).

      We’ll have to watch how this plays out.

  2. “What’re Spotify et al. going to do, whine that it’s unfair that Apple is paying the artists* and complain that they’ll have to pay them now, too? The other streaming music services will lose that argument with the artists and with the paying public. They’re all between a rock and a hard place.”

    Funny, Amazon essentially claimed exactly that with authors and ebook pricing, yet the public and the DOJ lapped that up no question.

  3. Spotify has to pay for the music is streams for its free service. It does not charge the users but rather the advertisers that appear on the service.
    Apple’s goal is to get enough users to join in the 3 month free period so that a lot of them will stay once they start having to pay. How is this any different that getting a trial period for a magazine or other type of subscription? The vendor still has to pay for various aspects such as production, shipping etc with the hope that the client will not cancel the subscription.

  4. I think that musicians and singers are going to benefit from this 9 day free trial when you look at the longer view. Getting people to hear artists that they didn’t even know about, but like and start buying their music is a huge benefit for bands, singers, etc.

    Not all will make big money but their position does increase.

    My example would be Shades Apart’s Eye Witness. Didn’t know them before seeing them in person and bought a couple of their CDs.

    People like Swift can look long term or can have a hard time looking past the end of their nose.

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