by Charlotte Hassan
Apple Music plans to significantly increase songwriter royalty rates.
In a recent proposal to the US Copyright Royalty Board, Apple suggests that the royalty rate should be set at 9.1 cents per 100 streams of a song. Though an Apple Music official confirmed these reports, the filing is private and no other details have been shared. If the proposal is accepted, the new royalty rates will be set in stone as of 2018.
What does this mean for Apple Music?
At last count, Apple Music had surpassed 15 million subscribers, which is half the amount of major rival, Spotify. Having only entered the music streaming market last year, Apple has achieved massive success, and hit milestones that took Spotify significantly longer to reach.
By implementing these royalty rates, Apple hopes that this will win over artists and gain them more exclusive music content. This isn’t the first time Apple Music has tried to wage in on Spotify – It’s a constant battle. Apple Music has been securing back-to-back artist exclusives with the likes of Drake, Chance The Rapper, Snoop Dogg and several others, in a direct bid to compete with spotify. By exclusively releasing content by big name artists, it has caused a surge in sign ups, many of which tend to carry on paying after the three-month free trial is up.
With the strategy being a huge success for the platform, Spotify has decided to do the same by hiring Troy Carterto work on getting the platform some exclusive content, despite previously saying that they think artist exclusives are ‘bad for artists, bad for fans.’ Though, we haven’t seen any recent exclusives from Spotify as of yet.
Increasing songwriter royalties will get the attention that Apple wants from content creators. If they capture enough exclusives – which should be easier now with talk of higher royalties, soon enough music fans will become tired of waiting to listen to music from their favourite artists. Apple hopes that this will be enough to get them to switch.
What does this mean for Spotify?
Well, we know Apple can afford to pay out more, hence the proposal. But, the question is, will Spotify be able to keep up with the payments, and is this going to be detrimental to the future growth of the service?
Bear in mind, Apple has the ability and scale to inject large amounts of cash into funding artists videos, revamping the platform, and adding more features for their users without the need for debt financing, like Spotify who needed to raise $1 billion in convertible debt financing just to keep up with the competition. Apple know increasing royalty rates may result in Spotify struggling to keep up. Some are now speculating that despite trying to promote themselves to rights holders, this was just a simple tactic to knock Spotify off the top spot.
Another important point to make, is that Spotify has been battling a massive litigation over non-payment of mechanical licenses, which is part of the publishing payout. When it comes to Spotify, songwriters and publishers have been complaining over a lack of transparency in payouts – They simply can’t make sense of what they are getting paid. By Apple filing for a set royalty payout, the service is giving songwriters and publishers the transparency that they have longed for. It not only simplifies the payment, but they promise to pay more.
On top of all of this, Spotify have to make artists believe and support their business model which includes both a free ad-supported and a premium paid tier. Unlike Spotify, Apple Music does not have a free tier, and this is what sets the two services apart, and is what artists find appealing about Apple Music – their art remains valued. This alone has helped Apple Music secure itself as a more artist friendly platform. With this, and an increased royalty rate Apple Music may well have the ability to expand quickly and overtake Spotify.
