Apple launches stealth attack with new streaming pay scheme

If we’d five cents for every time we’ve heard musicians give out about the money they get for streaming, we could probably afford to buy that artist’s latest album on vinyl.

Payments to artists have become the big stick to beat streaming services with in the past 12 months. Artists get a tiny cheque as remuneration for thousands or hundred of thousands of plays on Spotify, and they go on to social media to have a bit of a moan. Everyone joins in, the fuming is amplified and the narrative of “streaming is bad” is set in concrete.

The reason for such low payments is not as simple as “streaming is bad”. Instead, it relates to the contracts signed by the artists with recording and publishing companies, as well as the contracts in place between these latter entities and the streaming services.

Basically, the artists should be moaning and fuming and whinging about their own stupidity in signing silly contracts in the first place, but that’s not a good look.

Then, there’s the complexity around the actual way the payments are structured and who gets what and why. Even those who’ve worked in the music business for decades find it difficult to explain in an easy-to-understand, logical way how this works.

Simplifying structures

Those on the musician’s side of the house are not the only ones frustrated by this state of affairs. Enter Apple Music, one of the big players in the game. It’s obvious that the dudes in Cupertino have been banging their heads off a wall a lot when it comes to dealing with “the incredibly complicated structure that currently exists”.

That quote comes from a proposal the tech giant has sent to the US Copyright Royalty Board about streamlining and simplifying payment terms for songwriters and publishers. What is is suggesting is a minimum rate of $0.00091 per interactive stream, or 9.1 cents per hundred plays, which is equal to the royalties for one download.

Apple is calling it a “fair, simple and transparent” system, but of course, as we’ve seen from how it operates in the music and device market to date, Apple doesn’t do anything unless it suits its own purposes.

The big picture here is the competition. A payment of 9.1 cents per hundred plays might not sound like much, but it quickly adds up, especially if you’re running a free service such as Spotify or YouTube.

Cash to burn

Apple has deep pockets – it has billions in cash reserves on its corporate balance sheet – and knows that a system like this would see the competition burning through cash very quickly. If it can’t rein in its competitors by offering a better service, Apple reckons it can run the likes of Spotify, Deezer and YouTube off the pitch with a move like this.

While it would certainly suit Apple, what about the musicians? Many would baulk at such a figure for their art – especially after publishing and record companies take their cut – but it would be highly unlikely for Apple or anyone else to offer a higher figure.

It’s all down to the three judges who sit on the Copyright Royalty Board to have their say. They’re currently starting to work out the rates from 2018 to 2022, so it will be interesting to see how they react to Apple’s idea, what the rival services will have to say, and whether this move will have any significant short or medium-term bearing on the streaming business