Breaking: Apple Paying Just $0.002 Per Stream During Its Free Trial Period…

jesusfacepalm

Yesterday, Apple reversed course and announced that artists would be paid during the free trial phase of its upcoming streaming service, Apple Music.

Just one problem: Apple will only be paying a severely-discounted rate during the trial.  And that rate looks to be $0.002, or 1/5th of a penny per stream.

The warning signs on this appeared over the weekend, moments after Apple head of iTunes Eddy Cue announced that Apple would indeed pay artists during its three-month free trial, a reversal from plans to pay nothing.  “#AppleMusic will pay artist for streaming,” Cue tweeted.

Which led to the next question, ‘how much would they pay’?  The $0.002 figure seems to be the magic lowball, at least for indies.  One of our sources is an independent getting distributed through Sony (and received an email update this morning); the other is also an indie with a fairly substantial catalog.

Even before whisper numbers trickled into DMN this morning, the Wall Street Journal pointed to early warning signs.  “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,” the Journal reported, confirming the discount.  “In the first three months of the service’s life there will be no subscriber royalty rate on which to base the rates. The company could find other ways to calculate a rate and is expected to share its plans with music companies soon.”

Whether the $0.002 per-stream payout is a first offer or a take-it-or-leave-it figure remains to be seen.  But the sources that revealed that number to DMN were careful to note that major labels could receive an entirely different payout, and may already have elevated free-trial rates in place.

More as this develops…

 

Written while listening to Gui Boratto and Fedde Le Grande.

51 Responses

  1. MaybeNot

    ““In the first three months of the service’s life there will be no subscriber royalty rate on which to base the rates.”

    Yeah, Apple has no way to known how many subscribers it has during the free trial. Also, they don’t’ know the price of the subscription once the free-trial is over ( can I suggest 10$ a month ? )

    Also,they will pay only 58%, and will remove from iTunes any artist that refuses to be on Apple Music.

    Reply
  2. Anonymous

    “only problem: Apple will only be paying a severely-discounted rate”

    Yes, I was afraid of something like that — and this may just be the beginning.

    Anyway, there’s no need to sign anything yet. Wait 6-12 months, see what happens…

    Reply
  3. Paul Resnikoff
    Paul Resnikoff

    Just made a quick correction to the post: I had said 1/10th of a penny, actually $0.002 works out to 2/10ths of a penny which is 1/5th. hth!

    Reply
  4. rikki

    i dont understand the problem? if you are a real musician you make the bulk of your money playing live. streaming should be used to generate ticket sales,

    Reply
      • Appearing Tonight

        That is called the ‘get it from the other guy’ economic theory. Perhaps you might want to try it at work . . . .

        Reply
      • rikki8

        what you expect to make a living off streaming because you are horrible playing live…is that it?

        Reply
        • Anonymous

          Haha, yeah. We’re studio only cause we suck live.

          Like The Beatles. And The Wrecking Crew. Couldn’t play to save their lives.

          Reply
    • Benny

      “rikki” you are totally wrong to assume that all musicians make a living by playing live! A lot of songwriters do not play live at all but earn through recordings made by themselves and/or others. Songs played on radio and other broadcast media earn the songwriters money via Performance Rights Organisations. Streaming is only paying a tiny fraction of what it should.

      Reply
    • Versus

      Actually, we are not in the music business at all, but the t-shirt business. Real musicians know that recorded music is just a promotional exposure tool to generate t-shirt sales.

      Billboard plans to incorporate t-shirt sales into the album charts beginning this summer also.

      Reply
    • Chuck

      Live gigging pay has been at a 30 to 40 year wage freeze in most towns. The $400 band club gig of the mid eighties edged up to $450 to $500 in the 90’s and has now descended to $300-$400 range.

      Corporate gigs hovered around $2000 in the 90’s and now average in the $1100 range.

      The writing is on the wall for sub-rockstar live music pay.

      Reply
    • Jon

      Its not a matter of earning for gigs or whatever! We provide music and its not fair to work for free at any circunstancies! What if everyone buys a macbook and ask a iphone for free? Yeah, it would be funny to go out at a restaurant, eat and drink like an animal…and after all, you dont pay and use same argument: “you get a lot of money when restaurant is full, why should I pay for this bill? Guys, this music business needs to maintain sustentable, for everyone, not only majors, indies or whatever! If they want to take the big slice from the cake, artists should claim for their right…its not only about money, but professional integrity!

      Reply
  5. GStorm

    People should just send them invoices rather than let Apple set its own rate.

    Reply
  6. DavidB

    So that’s only about twice what Spotify pays on its free tier? Disgraceful.

    Reply
    • Anonymous

      i can’t tell if you’re being sarcastic or not, but there’s uproar and they’re paying TWICE as much as the other guy. what’s the problem here?

      Reply
  7. steveh

    OK £0.002 is not great for the 3 months free – but it’s still twice what Spotify pays for it’s full ad-supported free tier.

    Reply
    • Anonymous

      “OK £0.002 is not great for the 3 months”

      …it’s even less great compared to $.7 per iTunes download, though.

      And you can say bye-bye to download sales if you sign with Apple Music.

      Reply
      • steveh

        Two points:-

        1. Apple’s streaming service is competing with all the other streaming services, notably Spotify. If Apple’s payment per stream works out better than Spotify then that’s a step in the right direction – and if after the 3 months only of free they get a big paid subscriber pickup then it will be a lot better than Spotify, most of who’s users just use the free tier.

        2. Despite the danger of streaming cannibalizing download sales there is no evidence that Apple is purposely trying to sabotage iTunes. We’ll have to see how the synergy between Apple Music and iTunes works out, but if there are clear cross links between the two services it might be quite beneficial, certainly in the medium term.

        Reply
        • Anonymous

          “We’ll have to see how the synergy between Apple Music and iTunes works out”

          steveh, I have a question for you:

          You’re an Apple Music subscriber. You downloaded Katy Perry’s Dark Horse last night. For free. Now, you’re going to buy the album and download the same 1’s and 0’s once again.

          Here’s what I’d love to know:

          Why?

          Reply
          • Nina Ulloa

            Because your Apple Music “download” is just a queue. You can have it on your phone for offline listening for a little while, but can’t transfer it to any other device. Whenever I download stuff from Spotify for offline listening I never feel like I own the track, I don’t. I still go buy physical copies of the music.

          • Anonymous

            “Apple Music “download” is just a queue”

            Oh, they’re not really downloads! Thank you so much for clearing that up, Nina!

            Everybody else — including the rest of the press — got it completely wrong as usual:

            “you can still enjoy Apple Music on a plane, on a train, out in the middle of nowhere… just about anywhere, in fact. Just remember to download the music you wish to listen to before you leave the house, so that it’s stored locally on your device”
            Cultofmac

            “Many users have wondered whether Apple Music will allow for song downloads for offline listening, and the answer to that question is yes.”
            Macrumors

            “for $9.99 a month, subscribers would be able to download songs, albums or videos to their Apple Music library”
            Huffington Post

            “Apple confirmed the option to download content for offline use. “As an Apple Music member you can add anything from the Apple Music library — a song, an album or a video — to your collection,” Apple said in a statement to Re/code. “And that’s just the warm-up act. From there you can create the perfect playlist from anything you’ve added. You can save it for offline listening and take it on the road.””
            re/code

            “You will be able to download music from Apple Music for offline listening”
            c|net

            “Apple tells BuzzFeed News that *paying* Apple Music subscribers can download up to 100,000 songs for offline playing”
            BuzzFeed

            And how could that ever compete with iTunes downloads…

          • Jack

            How oblivious is this guy? Ever heard of Digital Right Management? (DRM)

            A download is permanent, transferable, it’s a one-time fee (or not), you don’t have to subscribe, you can back it up to another device, you can string thousands of them together and NEVER have to listen to a commercial.

            You can even get uncompressed files and have your favorite music available anywhere with no skips or glitches. Imagine that? And, you may even be listening to them through your streaming app and not even realize it. Streaming is awesome for discovering music, but downloads are the preferred method of listening to their collection for a LOT of people.

            It’s no wonder download sales are being displaced by streaming. But the iTunes download store isn’t going away any time soon. And even if it did, someone would quickly fill that vacuum as there will always be a market.

  8. Craptacular

    Why don’t you put some sauce on your exposure? That’ll taste fine.

    Reply
  9. Faza (TCM)

    As others have pointed out, it is more than Spotify pays on its ad-supported tier and about half of what the average Spotify rate works out at (accounting for both free and paid streams).

    My question is: does anyone find it surprising?

    I must respectfully point out that all streaming services pay out according to the following formula: total revenue / total streams. This is certainly true for Apple Music, based on the contract published here (provisions relating to Company’s Pro Rata Share). For the Apple Music free trial, total revenue would be $0, so the expected payout would be $0.00 per play (as originally proposed).

    Once they’d decided to actually pay us something, the question became: how much money are they willing to pay per user. This could be anything from full rate (minus Apple’s cut, naturally) to some kind of reduced payment (which seems much more likely). This per user rate, multiplied by number of users, will give us the total revenue to be divvied up. The average usage per user – and hence the eventual rate per play, as calculated by the above formula – is anyone’s guess.

    A couple of points to bear in mind:
    1. Apple is certainly rich, but putting up a full subscription for each and every user that decides to try their service for free seems a bit much, even for them. Not to mention the potentially disheartening situation that might occur when early adopters of the free tier decide not to follow up with a paid subscription: resulting in smaller revenues post trial period than during it (because there will be fewer paying users than were paid for by Apple).

    2. Apple does not guarantee a minimum rate per play, only a minimum wholesale price for each type of account. Looking at the minimum prices set out in the contract, it does not look to me like Apple plans on contributing quite so much. Whether this is reasonable is a matter for debate, however if there is considerable interest in the service from iTunes users, Apple could well find itself coughing up a couple of billion dollars for the trial period.

    Overall, we might consider the situation a moral victory, but let’s not kid ourselves that the actual amount of money on the line was ever worth fighting over.

    Reply
  10. DavidB

    …or maybe the better comparison is with whatever Spotify is paying on its discounted 3-month ‘premium’ trial. Users are only paying 99 cents for that – for the whole three months – but we don’t yet know what artists/labels/publishers are getting. I originally thought that they would only be getting a fixed share of revenue, therefore approximately zero, but someone pointed out that labels would likely have a minimum pay-per-play built into their contracts. I accepted that that was a fair point. But does anyone know what Spotify is actually paying out? There are indications – from Zoe Keating# and Jeff Price (June 11 here on DMN) – that Spotify’s *average* pay-per-play fell sharply just around the time that Spotify introduced the discount, which suggests that the pay-per-play on the discounted tier may be low. But does anyone have some actual info specifically on the discounted rate?

    #Zoe’s average pay-per-play has fallen from about 0.4 cents to 0.3 cents in the first part of 2015 compared to 2014. There *might* be some other reason for this, but the discount offer is the only obvious one to come to mind.

    Reply
    • DavidB

      This was written to follow on from my earlier comment, not as a reply to Faza, who must having been typing away at the same time as me!

      Reply
  11. Spotify pays more sadly

    Hey everybody, just FYI:
    Spotify actually pays more than this paltry pittance tax-dodging apple is ‘paying.’
    Spotify’s own website says it pays between $0.006 and $0.0084 per stream: http://www.spotifyartists.com/spotify-explained/

    So fuck them both. Support artists buy buying their music, using Bandcamp if possible, and go to their shows, buy their merch. If you actually care about them surviving and making the music you love, that is…

    Reply
    • Anonymous

      “So fuck them both”

      Agree, Merlin and Beggars made a terrible mistake when they signed with Apple.

      Those who still have a choice should at least wait 6-12 months. A lot of things are going to happen in 2015 and 2016…

      Reply
      • Spotofy actually doesn't pay more...

        Spotify free tier pays .000966 (.001) and Apple is paying .002… that’s double.

        Reply
    • There is something...

      That’s the average including premium service ! If you take only the amount from the free service, it’s lower than this…

      Reply
  12. Curious

    Everyone is looking at Apple’s terms, but what about Google? They offer a two-month free trial; have any pop singers written letters to them about their conditions during the trial? Or does Google pay for streams during these trials? If so, does anyone know at what rate?

    Reply
    • Anonymous

      People are shocked because Apple used to be artist-friendly.

      Nobody expects anything from Google (except theft, obviously).

      Reply
      • Anonymous

        “People are shocked because Apple used to be artist-friendly.
        Nobody expects anything from Google (except theft, obviously).”

        THIS

        Reply
      • Curious

        Artist-friendly? They like music, but they don’t pay artists; they pay record labels, who then screw artists.

        Reply
        • Anonymous

          “Artist-friendly?”

          Which part of “used to be” did you miss?

          And yes, Apple’s entire ecosystem was indeed artist-friendly: Logic–>Mac/Apogee-conversion–>iTunes–>Cash.

          But that’s history, and we need something else.

          Reply
          • musicpatron

            Apple weren’t very nice to artists when they bought the company that made Logic, and discontinued the Windows version within weeks, leaving many musicians forced to move from PC to Mac or stop using Logic

  13. Another Apple Loophole

    We still need Taylor to fix Apple’s non-interactive radio payments (e.g. Pandora-style). As noted in prior user posts on DMN, if an Apple user is part of Apple’s iCloud, then per Exhibit K (Radio Service), Section 1(o) of the Apple agreement any streams to that user are considered “Non-Royalty Bearing”.

    Since most of Apple’s users are using iCloud (whether they know it or not), Apple will not be paying for the majority of their radio streams.

    Reply
    • Anonymous

      Yes.

      It’s great that indies can opt out of Apple Music — we obviously need to do that if we want to sell iTunes downloads — but can we opt out of Beats1?

      Reply
  14. DakotaFred

    FUCK APPLE. FUCK SPOTIFY. FUCK GOOGLE. THEY’RE ALL LEECHES SUCKING THE VERY LIFE OUT OF THE CREATIVE WORLD. BOYCOTT ALL OF THEM!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    Reply

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