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Beats Music Promises to Pay Everyone the Same Royalty Rate…

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So how is Beats Music going to ‘squash Spotify,’ much less make a dent?  One way is to attack Spotify’s record of cloudy payouts and opaque financial practices: according to details shared with Digital Music News this weekend, Beats Music will pay every artist, label, and rights owner the same amount – indie, major, DIY, or otherwise.

“Beats Music is committed to the principle that music has real value and will be acting accordingly by paying the same royalty rate to all content owners major and indie alike, while simultaneously providing a platform for fan interaction,” the company offered in a statement.

Beats will officially launch on January 21st, with ‘Chief Creative Officer’ Trent Reznor leading the artist-friendly crusade.  “We want [Beats] to be just as meaningful for artists as it is for fans,” Reznor relayed.  “We’re committed to providing revenue to artists, while helping to strengthen the connection with their fans.”

Actually, Beats’ payouts will probably be much higher than those mailed by Spotify, at least when measured per-strream.  The reason is that Beats won’t be burning piles of cash on ad-support (ie, free) access, which cuts per-stream royalties by more than 90%.  In fact, the only way to score a discount is through a bundled AT&T Family Plan (up to 5 users for one, $14.99 fee), and  a 30-day free trials (sort of like Rhapsody).

But wait: doesn’t Beats have to pay the major labels giant upfront payments for access to their catalogs, just like Spotify?  Sounds like another slippery avalanche of non-transparency is already afoot, with Beats facing the same damn problem that every micro-penny-paying streaming service grapples with.  Becuase, what IS this egalitarian rate that everyone will enjoy, anyway?

The answer?  “We don’t share details on payouts,” Beats media relations person Brittany Hodill tersely emailed.

 

Image by Michael Coghlan, licensed under Creative Commons Attribution 2.0 Generic (CC BY 2.0).  Written while listening to Empire of the Sun.

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Comments (38)
  1. Casey

    I’m not following the math on their family plan. $15 per month for two users would be fine. But five? That doesn’t leave much money for royalties. Rhapsody’s $15 per month plan was still designed to be used by only 1 person. Though I don’t even know if that plan still exists.

    Don’t forget they are also offering a 90 free trial for the family plan. Are there royalties for the trial or will it be deemed “promotional” and be excluded from paying royalties? 90 days is a long trial.


    Reply
    1. Truth Time

      This is probably because AT&T agreed to cover some of the offset costs to get people to switch carriers and join them. This in turn then increases their market share and increases their ability to secure other, bigger deals if they’re the biggest carrier on the block. It’s called a vendor contract. It happens all the time, and is usually the answer to every “I don’t understand why this company would make this boneheaded move..?” type of question. So, you wonder why your local Gamestop is featuring game X over game Y?? Vendor contracts. Wondering why crappy CD 1 is on all of the endcaps instead of crappy CD 2? Vendor contracts involving rebates per scans. Wonder why the in-house Target brand of body lotion is the exact same stuff but a dollar cheaper than the Vaseline brand right next to it? Vendor contracts (Target saying we won’t carry this product unless you make it identical for our in house brand and sell it cheaper to us.. yes, that happens, it’s the same stuff, and it’s still financially sensible for them to carry the brand name.. which tells you what? Yep, people are idiots).


      Reply
  2. Anonymous

    So the per stream rate is the same but the upfront payments certainly aren’t.


    Reply
    1. Anonymous

      The only thing you can be sure of is that the owners and all the professional curators are paid well until they cash out and Beat Music dies.

      I wouldn’t be surprised if the date is set already.


      Reply
  3. Yves Villeneuve

    It’s interesting. The parents pay for the family plan. The average household size in America is roughly 2.5 persons. Less than 10% of population would be active streamers according to realistic numbers. When kids start their own families they can subscribe to their own family plan.

    Nonetheless, I’ll wait for actual stream payout information before making a decision whether to supply them my music. I don’t see why they can’t show their entire hand if they are paying everybody the same stream rate unless it is less than the Rhapsody’s rate.


    Reply
  4. John

    I’m highly doubtful that people will pay $9.99 a month or get a family plan. People, for the most part, want FREE. This service will be DOA.


    Reply
  5. mental mayhem tattoos

    All artists need payment for the work they produce but also u have to remember u can’t pay enough for the support Trent will receive from the music industry ..anyone who wants free would u work for free?


    Reply
  6. Anonymous

    “We don’t share details on payouts”

    Haha, right. Bye-bye, Beats.


    Reply
  7. GGG

    I keep going back and forth on this one. The fact that Trent is on board makes me think it truly will be a bit more artist friendly (unless of course Trent got a nice signing bonus), but their refusal to actually say what that payout will be seems like typical corporate bull.

    Further more, Beats is definitely a hip thing right now so their marketing may drive more people to the service unlike Spotify’s marketing department which is apparently entirely made up for 4 year olds. At the same time, will be interesting to see how many people actually pay.

    But oh well, nice to see a legit competitor so we can really see what streaming can do. Looking forward to seeing what happens.


    Reply
  8. Anonymous

    Paying everyone the same implies that all music is worth the same.


    Reply
    1. Yves Villeneuve

      Do you want to pay on a per listen basis? It can be arranged. The retail price is different for all cars depending on make, model, features and year.


      Reply
  9. FarePlay

    So many questions. Clearly, all the major players in this space, by offering free service for so long, have made it far more difficult to succeed as a paid service. To succeed Beats Music is going to need something, in addition to, great playlists to be successful.


    Reply
    1. Yves Villeneuve

      Agree. However, content in curated playlists is likely to be mostly influenced whether labels received advances or not. Beats is going to promote stuff that will recoup any advances made. This applies to any retailer that made cash advances.


      Reply
  10. Chris

    Beats will have to pay advances to pretty much every major label and a great majority of the indie distributors or they wont get the catalogue.

    And again how can a streaming service claim to be artist friendly when in fact probably less than 0.1% of it’s deals with be directly with artists?


    Reply
  11. FarePlay

    If Beats Music understood that the function of radio has always been to stimulate the sale of recorded music, by curation, and contribute to a healthy financial eco-system that rewards artists and creates new “stars” then this should have been their negotiating position.

    If Beats Music enters the game with seamless integration to online sales portals and supports the value proposition of owning music, they can contribute to a resurgence of recorded music sales. The digerati can rant and rail about the death of purchasing recorded music all they want, but in order to have a healthy art community in America, not just music, we need to re-position the conversation to support the value of owning music and books.

    Kids will throw down money to buy Red Bull.


    Reply
    1. FarePlay

      From what I’m reading, it appears that Beats Music is offering unlimited access and listener playlists, etc., etc. So while I’m still holding judgement until all the details are revealed, my optimism is plummeting.

      Or, there will be entirely new opportunities created by artist owned streaming and distribution services…….


      Reply
      1. Anonymous

        “Or, there will be entirely new opportunities created by artist owned streaming and distribution services”

        Like I say — there are two ways for artists to make money from streaming:

        1) Start a streaming site.
        2) Buy shares in a major label.

        This is Mr. Reznor giving #1 a shot.


        Reply
  12. Spotify

    Where’s the bashing of Beats Music?

    If Spotify offer $15 for 5 on a Family Plan ($3 per subscriber), there would be dozens of comment denouncing Spotify as anti-artist.


    Reply
    1. Yves Villeneuve

      What Spotify is suggesting isn’t very accurate. In the family household unit, financial/asset sharing is expected in more cases than friendship/stranger situations. Nonetheless, here is my comment to Faza below:

      “I agree with your position here, Faza. I’m going to take a wait and see approach as I need assurances not empty promises/studies/predictions regarding stream rates and whereby only household family members can be subscribers to the Family Plan.”


      Reply
  13. TuneHunter

    Nice picture with breadcrumbs!
    Expect just breadcrumbs unless we start to charge for discovery of every tune that is not part of your confirmed play list.
    You’re welcome to listen (no ads or sub req’d.) but the minute you want to here it again PAY.
    The best cash source for artists, Google, Spoofy, Pandora, Dozer, Deadbeats or any other new arrival.


    Reply
    1. Anonymous

      “The best cash source for artists”

      The only sources are iTunes and YouTube.

      YouTube may be screwing it all up now with YouTube Music. That leaves us with iTunes…


      Reply
      1. TuneHunter

        YouTube ad income is less adequate.


        Reply
  14. JTVDigital

    ‘doesn’t Beats have to pay the major labels giant upfront payments for access to their catalogs, just like Spotify?’
    For sure they have to.
    Usually it is a few hundred thousands of $ as a one-off to license a major record label catalogue.
    Multiply per 3 then.


    Reply
  15. nypbbob

    Sounds like more of the same…… While its nice to see an “attempt” its still not much different than Spotify or Pandora.

    At least companies like, Funn Networks, who is supposedly launching soon, posts on their Twitter and Facebook pages what they are going to pay out.. And early reports are the royalties are 10-20 times more than Spotify on a per user basis. And yes, for majors and indies.. Same pay outs.. Bottom line is this– until somebody actually gives content owners what they want, they (content owners) will only have one leg over the fence..


    Reply
  16. R.P.

    Rate is too high. They should take a note out of the WWE’s book and stay under the $10 mark, which has proven to be a very psychological factor. In order to compete with Spotify they’re going to have to compete with their pricing. imo.


    Reply
  17. Faza (TCM)

    Interesting stuff. Dr. B.O. Envelope – respected economist and music biz wiz – says that we might see something like 1.4 cents per play from the AT&T Family Bundle (assuming five users at an average of 10 hours monthly listening per user – not inconcievable, given that it’s unlikely that all five members will be heavy users, or even use it at all – an average of 4 minutes per song, no commercials and that Beats will take the ‘industry standard’ 30% off the top).

    Incidentally, the article mentions the Family bundle as “the only way to score a discount”. A discount on what? What is the normal, single-user fee?

    I wouldn’t worry much about advances paid to the major labels – if they are advances. All that means is that Beats will be out of pocket from day one – ‘coz they’re paying in advance – but it should not affect royalty calculations between various rights holders (whether they received an advance or not). As long as Beats remains solvent, those rights holders who did not receive an advance should be paid what’s owed on the normal schedule (while those who did will not receive further payments until their advances are recouped).

    Of course, any fees payable over and above the royalties stemming from actual usage would have an effect. Do we have any evidence of such fees?

    I’d also like to briefly address the question of “why aren’t people hating on Beats”? It’s actually pretty simple: they haven’t done anything, yet. When the service rolls out and the first statements come rolling in (I’d expect somewhere around Q2-Q3), then we’ll know whether to hate on them and for what.

    Spotify, on the other hand, has been around for years and compounded their unimpressive (at least as far as artists are concerned, anyway) business model with some very shoddy PR. That, in my book, makes them perfect hate-bait.

    (Aside: Deezer, who are marginally better – but still better – financially, have mostly avoided the flak by keeping on the down low. If you insist on hogging the searchlight – as Spotify does – be ready to take most of the flak.)


    Reply
    1. Anonymous

      “take the ‘industry standard’ 30% off the top”

      Except YouTube pretty much is the industry these days — and it takes 50%. :(


      Reply
      1. Faza (TCM)

        Do they? I admit that this fact has eluded me. Still ended up paying more – on average – than Spotify last year (for me anyway).


        Reply
        1. Anonymous

          “Do they?”
          Yes, according to Business Insider. I’ll post the link separately below (it probably won’t show up until tomorrow because of DMN’s spam filter).

          “[YouTube] Still ended up paying more – on average – than Spotify last year (for me anyway)”

          You don’t mean per stream, do you?


          Reply
    2. Yves Villeneuve

      I agree with your position here, Faza. I’m going to take a wait and see approach as I need assurances not empty promises/studies/predictions regarding stream rates and whereby only household family members can be subscribers to the Family Plan.


      Reply
      1. abcjohnson

        Thank you, Yves Villeneuve.
        Your comments and replies are very helpful in guiding my decision to subscribe to Beats Music…or not.


        Reply
  18. Truth Time

    I’m going to pay the $15 for the family plan. My parents and brother are all on MY plan. Both my brother and I pay $9.99 a month for spotify to have it on our mobiles. This saves us $5 a month and gives streaming music access to my parents, who have never used it before. You have to imagine their plan is for easy adoption. One article I read is that they want to have 50mm US subscribers at some point in time.. Spotify has 9mm estimated in the US at this point. I think it’s totally do-able since AT&T is offering the family discount right off the bat and they’re the second largest carrier in the US behind Verizon (or they’re first, I cannot remember). Either way, what you’re going to see happen is a lot of AT&T customers trying this out because it’s A) cheaper than paying separate for streaming subscriptions, even if only 2 people in the family are paying. B) BEATS is a recognizable brand at this point, so many of the parents who shelled over $300 for overpriced headphones will think this is a steal and sign up their family on it. You’re also going to see a lot of curious streamers who currently pay for a service switch over due to curiosity.

    So then what happens? Well, down the road once Beats has solidified itself at a certain subscription level they pull out of the family plan discount and everyone has to pay $9.99 for the service. You know have exponentially increased your subscriber levels. Don’t think it’s possible? This is the same company that took Sennheiser HD280s, boosted the bass frequencies, made them colorful, and marked them up 300% and have dominated the headphone industry. Don’t count them out.


    Reply
    1. Jughead

      I think the culture of “free” is too far down the road to reverse it. It will take some magic psychology to convince young consumers who work low-paying jobs that they have a moral obligation to pay for music.


      Reply
      1. GGG

        It won’t be about morality, though, it will be about ease and $10 not really being that much money a month. If it just becomes a normal thing that everyone does, I don’t think it’ll take too too long to catch on. Plus, there’s always some gimmicky things you can do to entice. Some big band partners up and gives away ticket codes to subscribers, or gives away meet and greets, or merch or whatever.


        Reply
  19. Bearzo

    Streaming payouts average about $0.002 per stream.
    The average artist can’t sustain a living this way.

    This shows just how much each music service pays out per stream:
    http://tinyurl.com/k8nrs7r


    Reply
  20. joe baearnstern

    do u have have pay like netflex please andswer


    Reply
  21. Skint

    As an artist I got my very first statement form Beats, 1 play generated 0 dollars.. a first for me, even Spotify pay for 1 listen… Way to go Beats..


    Reply

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