This past couple of days was very interesting for Apple Music. After months of negotiations with record labels to secure a free three-month trial period, Taylor Swift swooped in with a Tumblr post and flipped the script in less than 48 hours.
Everyone should recall that Apple was able to persuade record labels to sign off on a substantially longer royalty-free trial period by agreeing to pay 71.5 percent of all subscription revenue once the trial period expired. This figure is marginally higher than the industry norm of 70 percent. Note that these figures represent U.S. royalty rates only.
BGR reported that before Swift convinced Apple to foot the bill for royalty payments, many wondered if Apple’s increased royalty rate on the backend justified an additional two months of streaming during which no royalty payments would be made to music owners.
Somebody was able to crunch some numbers and it turns out that the extra 1.5 percent in subscription revenue Apple agreed to pay doesn’t do much at all to help artists.
Michael DeGusta did some math and found that Apple’s increased royalty rate would offset an additional two months of free streaming about 8 years later.
Now before anyone gets worked up into a tizzy, BGR realize that this is just a back of the envelope calculation with no accounting for a myriad of other factors such as conversion and retention rates etc. Still, it provides an interesting, if not cursory, look into why some artists were extremely unhappy with Apple’s initial terms.
Of course, the counterpoint to this is that Apple Music will attract subscribers who otherwise wouldn’t be paying for music at all. From that vantage point, the money artists would have missed out on during Apple Music’s three month trial period was money they may not have seen in the first place.
Everyone should recall that Apple was able to persuade record labels to sign off on a substantially longer royalty-free trial period by agreeing to pay 71.5 percent of all subscription revenue once the trial period expired. This figure is marginally higher than the industry norm of 70 percent. Note that these figures represent U.S. royalty rates only.
BGR reported that before Swift convinced Apple to foot the bill for royalty payments, many wondered if Apple’s increased royalty rate on the backend justified an additional two months of streaming during which no royalty payments would be made to music owners.
Somebody was able to crunch some numbers and it turns out that the extra 1.5 percent in subscription revenue Apple agreed to pay doesn’t do much at all to help artists.
Michael DeGusta did some math and found that Apple’s increased royalty rate would offset an additional two months of free streaming about 8 years later.
Of course, the counterpoint to this is that Apple Music will attract subscribers who otherwise wouldn’t be paying for music at all. From that vantage point, the money artists would have missed out on during Apple Music’s three month trial period was money they may not have seen in the first place.
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