April 20, 2021
Apple Music informed musicians that it pays one penny per stream, which is roughly double the rate paid by Spotify, the world’s largest music streaming service. Spotify pays about one-third to one-half penny per stream, which is potentially offset by its 155 million subscribers (out of 345 total active users) versus Apple Music’s 60+ million. The Union of Musicians and Allied Workers (UMAW) responded to Apple’s announcement by saying that all music streamers should pay one penny per stream “at a minimum.”
The Wall Street Journal notes that, “artists aren’t paid directly by streaming services … instead, streaming services pay royalties to rights holders … which in turn pay artists based on their recording, publishing and distribution agreements.” Although “Apple and Spotify pay rights holders based on the share of total streams their artists garner on each service … artists cite the per-stream pay rate as an indicator of their earnings.”
According to Apple, it pays 52 percent of subscription revenue (or 52 cents of $1) to record labels, while Spotify, “which generates revenue both from subscriptions and its free ad-supported tier, says it pays two-thirds of every dollar of revenue to rights holders, with 75 percent to 80 percent of that going to labels,” which ends up being 50 to 53 cents per dollar, “depending on agreements between the service and different labels.”
Variety reports Apple’s letter states that its “average per play rate is $0.01” but nuances in much of the wording is confusing. “It is not hard to see how the inaccuracies, which were not stated but may have been inferred from the letter and the WSJ article, could lead some artists to think that they’ll be getting a penny from Apple every time their music is streamed, or even that the company has increased its rates to pay artists a penny per stream.”
But, it points out, the letter specifically states that “royalties from streaming services are calculated on a stream share basis,” which is actually “a song’s percentage of the service’s total number of streams, which means Apple Music does not pay royalties on a per stream basis.” Variety concludes that, despite the press that makes it appear Apple and Spotify’s rates are far apart, they are much closer.
“More to the point, the inaccurate reports and slippery wording play directly into widespread confusion or lack of knowledge about how artists earn money from streaming services, and how misleading per-stream rates can be,” says Variety, adding that “multiple industry sources” stated that the per-stream model “is an antiquated and even inaccurate way of measuring a streaming service’s power.”
“What we look at is overall subscription growth, the churn rate — with a low rate being the goal, because it means people are sticking around — and the conversion rate, which is how many people stay past the free trial or, in Spotify’s case, switch from their ad-supported platform to a paid one,” said one executive.