POISON APPLE:  Tech Giant's Royalty Proposal Puts Spotify In The Crosshairs
  • TUESDAY, JULY 19, 2016

  • Posted by: Robert Steiner

Tim Cook...no doubt plotting some dubious, new plan to vanquish his enemies.


Earlier today, the New York Times broke the story that this past Friday, future masters of the digital and physical world, Apple, filed a proposal with the Copyright Royalty Board in hopes of simplifying streaming royalties and distribution rates for artists. Currently, streaming services like Spotify and YouTube pay 10.5-12 percent of overall revenue, which is divided between performance and mechanical royalties, and then distributed to various publishers and copyright holders. Apple's proposal suggests getting rid of the complicated formulas and distribution system and replacing it with a fixed minimum rate of 9.1 cents per 100 streams (or equivalent to one download). In doing so, the company hopes to make the royalty distribution for streaming more simple, transparent, and beneficial for artists...or at least that's what they're saying.

Even while Apple has seemingly good intentions, it's pretty clear to people following the streaming wars that this is a move meant to choke out Apple's biggest streaming competitor, Spotify. As the two biggest streaming services on the market, Apple Music and Spotify differ from each other in one crucial way: Spotify offers two tiers of service, an ad-free paid service and a ad-based free service, while Apple Music only provides a paid service. By providing both free and paid services, websites like Spotify and YouTube benefit from the current system because they don't actually generate a lot of revenue from the free-level services and therefore have to distribute less royalties. Apple's fixed rate idea, however, would greatly raise the rates Spotify must pay artists on all levels, making its free service suddenly more expensive to maintain.

Apple claims that its motivation behind the proposal is to help out artists and make the paying system more transparent, and in a lot of ways, they're doing just that. But let's be honest: Apple is first and foremost a business, a pretty notorious one at that, so it's clear they're mostly doing this to wipe out their biggest competition. While they may very well be fighting for the struggling artists now, they haven't exactly done so in the past. Even though Apple Music is paid on all levels, the service offers a three-month free trial, a longer period than any other pay-only streaming site. Apple may be on their high horse about giving the artist what they deserve now, but back when they launched Apple Music in 2015, they were initially going to give artists absolutely nothing for the millions of iTunes users automatically subscribed to the 3-month free trial. It took the powerful finger-wag of Taylor Swift for Apple to run away with their tail between their legs and give into compensating artists, but it was probably out of fear of a PR nightmare rather than a genuine change of heart. If Apple gets what they want, the fixed rate is approved and Spotify is banished to the nether or whatever, it's hard to say if Apple will stick with what they promised or find the next way to increase their business. They might be on the music industry's good side right now, but they definitely aren't around to make friends. Currently, Apple doesn't even pay the statutory rates set by the Copyright Royalty Board, instead negotiating rates directly with major publishers, so who's to say they'll even follow their own rules?

This opinion may be on the cynical side, I'll admit, but I learned two things from reading 1984 by George Orwell: Rats are terrifying and always be suspicious of larger entities. Apple may be helping the little guy now, but the reality is that they are definitely not the little guy. It's true the music industry needs a change, especially when it comes to streaming, but I personally don't like the idea of leaving that change to Apple, since it's hard to say if they will continue fighting the fight once they get what they want.

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