As expected, Apple announced its forthcoming music streaming service on Monday at its annual WorldWide Developers Conference. The service is scheduled to launch at the end of June, and naturally, our primary focus is on how the new offerings will impact musicians. The presentation was short on details, but here are some of the questions we’ve been wrestling with (and some partial answers)
1.What are the terms of the deal? Are they the same for everyone?
We’ve seen some media coverage of a leaked contract suggesting that Apple’s new terms amount to a reduction in payment—from the usual 70% of revenue to just 58%. That’s probably wrong, because the contract in question appears to apply only to sound recordings, not to compositions. That extra 12% is likely to be set aside to compensate publishers and songwriters, so the existing 70% to rightsholders remains intact. (Typically for physical sales and downloads, labels are responsible for paying songwriters/publishers, usually at the mechanical rate. But for streaming, that responsibility usually rests with the service.)
More troubling is the report that Apple doesn’t plan to pay rightsholders for use of their works during a three-month free trial period. Some fear that this could be disastrous for artists who have a new album out in the 3 months after the service launches, as those months often tend to be when play counts are highest. It does seem odd for a company that in April reached $194 billion in cash on hand to ask artists and indie labels to risk three months of potential income in a gamble for subscription monies.
And perhaps most troubling is the notion that artists and indie labels are discovering details of the license agreements governing the use of their work from media reports on leaked contracts. Non-disclosure agreements are the likely culprit, but are digital distribution companies fulfilling their duty to report back to labels and affiliated artists the terms of these deals? Or could it be that the deals aren’t actually inked yet? One (anonymously sourced) report indicates that many independent labels have refused to sign Apple’s deal, citing unfavorable terms.
2.What are the opt-in / opt-out options on Apple Music?
Can an artist or label make their work available in the iTunes download store but opt-out of the streaming service if they find it doesn’t suit their business model? Might they be allowed to put part of their catalog on streaming for promotional purposes and leave the rest in the download store? Will windowing and exclusives be allowed? If not, will there be outrage along the lines of what we saw with YouTube’s Music Key contracts?
It’s not surprising that many artists want to be able to decide how and where their work is made available on-demand, and choose the business models that make the most sense for them based on their unique niche in the marketplace. We’ve now seen reports that The Beatleswon’t be present on Apple Music’s on-demand streaming, but their work will continue to be able on the iTunes download store. Will artists without the fab four’s clout be afforded this flexibility?
It’s worth noting that the “all-in” approach has already been in use with non-negotiable iTunes Radio contracts appended to iTunes store agreements. And Google Play’s download store is likewise, reportedly an all-in contract that includes Google Play Music All Access. You can’t have your music in one but not the other.
3. Will the new services be integrated with Sonos?
A growing number of music subscribers listen via smart speaker systems that can aggregate digital music services. Beats worked with Sonos after even after Apple bought it, but will that change now that the brand is being moved under the Apple Music umbrella? Initial reports indicate that Apple Music won’t work with Sonos at launchleading to worries that years after Apple abandoned DRM in the iTunes store, they could be building another walled garden to try and monopolize the hardware side of music listening with their Airplay format and AppleTV devices.
4. What will the absence of a free tier mean?
Different kinds of artists have leveled different kinds of criticisms of on-demand streaming services, but often these criticisms get crudely lumped together in the media as “streaming doesn’t pay very well.” It’s important to get into the nuances of these varying perspectives to understand how different kinds of artists working with different assumptions and aspirations about scale are impacted. For example, Taylor Swift’s primary objection to Spotify last year was with the existence of the free/ad-supported tier, which means a significantly lower rate per-play than a subscription-only service. Swift didn’t seem to have any overall objection to the method of calculation for streaming payments.
Other artists, however might be fine with the inclusion of a free-ad-supported tier (possibly with some limitations), but more fundamentally object to the per-play pro-rata payout model used by most on-demand services, which tends to reward superstars and hitmakers but could require niche acts to exponentially grow their fanbases to be able to make anything close to what they used to make from physical sales and downloads.
Despite the absence of a free tier, Apple Music (like Tidal) appears to keep the pro-rata payout model intact. Using play count as the sole proxy for value on interactive services systematically disadvantages artists making work that can be transformative deep listening, but not the kind of thing that you listen to on endless repeat—something we’ve been thinking about today in light of the news of Ornette Coleman’s passing. So what is Apple going to do to better serve these kinds of artists? A new radio station might be fun, and new social tools could expose certain artists to new audiences, but it seems unlikely to be a gamechanger in terms of revenue.
For their part, rival streaming service Spotify has mounted a vigorous defense of its free/ad-supported tier as a path to subscription, bragging about their gross payouts and projecting higher payouts to come. But it’s difficult to really know how those claims translate to individual artists. To begin with, Spotify claims that a “typical” “indie/niche” artist generated $700,000 of revenue in the past year, which is presumably divided among rightsholders. They don’t share their methodology or definitions, but citing this large figure as “typical” strains credulity, to say the least.
While most agree that streaming’s going to be a big part of how music is consumed in the future, we don’t want service development simply to be defined by a battle between rival companies to capture the biggest share of users. Rather, we want to see a flourishing of licensed services looking for better ways to serve the varying needs of different kinds of musicians and music fans. That might require services to, um, think different, or at least think about differences across the pool of artists.