Apple Music told artists it pays a penny per stream in a letter reviewed by The Wall Street Journal.
The disclosure, made in a letter to artists slated to be delivered Friday via the service’s artist dashboard, is part of a growing effort by music-streaming services to show they are artist-friendly. For Apple Inc., it can be seen as a riposte to Spotify Technology SA, which last month shared some details of how it pays the music industry for streams on its service.
Apple’s penny-per-stream payment structure — which music-industry experts say can dip lower — is roughly double what Spotify, the world’s largest music-streaming service, pays music-rights holders per stream. Spotify pays an average of about one-third to one-half penny per stream, though its larger user base generates many more streams. Apple’s payments come out of monthly subscription revenue from users.
Artists, managers and lawyers, still reeling from the loss of touring revenue during the pandemic, have been calling for higher payouts from music streaming, which has grown rapidly in the past year. Many fans have joined the push to raise artists’ compensation.
Apple last reported more than 60 million Music subscribers in June 2019. Spotify leads the industry in subscriptions with 155 million, out of 345 million total active users including those who listen for free to the ad-supported tier. Amazon said early last year that its music subscription offerings had 55 million subscribers.
“As the discussion about streaming royalties continues, we believe it is important to share our values,” Apple said in the letter. “We believe in paying every creator the same rate, that a play has a value, and that creators should never have to pay for featuring” music in prime display space on its service.
Artists aren’t paid directly by streaming services, so a single play of a song doesn’t result in a penny going into that artist’s account. Instead, streaming services pay royalties to rights holders, which include labels, publishers and other distributors, which in turn pay artists based on their recording, publishing and distribution agreements. Both Apple and Spotify pay rights holders based on the share of total streams their artists garner on each service.
Yet artists cite the per-stream pay rate as an indicator of their earnings. Major labels say the average monthly streams per user is a better measure of the streaming economy, and growing numbers of streams mean more money coming in for artists. Both Spotify and Apple, they say, are at or near the 1,000 streams per listener per month benchmark that is seen as a success.
In the letter, Apple says it pays 52% of subscription revenue, or 52 cents of every dollar, to record labels. Spotify, which generates revenue both from subscriptions and its free ad-supported tier, says it pays 2/3 of every dollar of revenue to rights holders, with 75% to 80% of that going to labels, which translates to 50 to 53 cents on the dollar, depending on agreements between the service and different labels.
Spotify delivers much more revenue to the music industry than Apple does, since it has many more users. Its average per-stream payout rate is lower, though, because the average Spotify subscriber listens to more music per month than listeners on other services do. Plus, on Spotify’s free tier, ads don’t generate as much revenue as its premium service does. Spotify has said that while its free version generates less income than its paid one, it brings in eventual subscribers.
“We’ve conducted extensive testing that consistently shows that when we take the free service away, those listeners turn to non-revenue-generating alternatives, meaning the collective music industry is missing out on revenue,” the company says in “Loud and Clear, ” an online report about payments to artists.
Syndicated from: Wall Street Journal
Write to Anne Steele at Anne.Steele@wsj.com