Apple's Swift response puts spotlight on royalties of streaming companies
Published 23/06/2015 | 02:30
It may go down as the most profitable love letter in history. Taylor Swift's public chastisement of Apple for not paying musicians during a three-month trial period for its new 'Music' streaming service has resulted in a rare u-turn from the tech giant. "We don't ask you for free iPhones," Ms Swift wrote over the weekend in an online post entitled 'To Apple, Love Taylor'.
"Please don't ask us to provide you with our music for no compensation."
Within hours, Apple's head of music, Eddie Cue, publicly responded.
"We hear you @TaylorSwift13 and indie artists," he tweeted. "#AppleMusic will pay artist [sic] for streaming, even during customer's [sic] free trial period."
So is Taylor Swift now a power broker within the music industry? And is the commercial model favoured by online streaming companies a sustainable one?
Ms Swift has form when it comes to taking a stand against streaming companies. Last year, she pulled all of her music from industry leader Spotify, in protest at that company's free ad-supported option.
But the move was largely symbolic. Few other artists followed Ms Swift out the Spotify door and the Swedish company - itself part-owned by music labels - has almost doubled its paid subscription figures since then. The walk-out also made relatively little difference to Ms Swift's own finances.
Her overall payments from Spotify varied between €500,000 and €5m per year. But this is a drop in the ocean compared to the €120m earned from her last tour, or the tens of millions expected to be earned from her current tour (she is due to play Dublin's Point Depot theatre for two nights next week).
Live events now make up a much bigger part of music corporations' commercial strategy.
US music industry magazine 'Billboard' estimates that global touring revenues are now surging past €20bn per annum, a huge increase on five years ago. However, this income is partially to make up for the withering returns from recorded music sales, either through physical media (CDs, vinyl and other formats) or digital downloads (iTunes). Only online streaming services from companies such as Spotify, Today, Deezer and Apple Music are seeing any growth in revenue to music companies and their artists.
For its part, Spotify says that it pays 70pc of its revenue to artists and their representatives. Apple says it will pay slightly more. But at a fraction of one cent per stream paid out to the music label, it would take millions of streams of a song - something very few tracks achieve - to start seeing musicians making even a thousand euro.
And the industry's biggest player, Spotify, gets three-quarters of its streams from its free, ad-supported tier. Musicians such as Taylor Swift complain that this perpetuates the notion that music is moving to a 'free' model. Streaming companies respond that they are improving online conditions for artists by eating into online piracy, where the musician gets nothing at all.
"We've been hearing a lot of concern from indie artists about not getting paid during the three-month trial period, which was never our intent," said Eddie Cue, Apple's head of music.
"We never looked at it as not paying them. We had originally negotiated these deals based on paying them a higher royalty rate on an ongoing basis to compensate for this brief time. But when I saw what Taylor had written, it really solidified that we needed to make a change. We will now pay artists during the trial period and keep the royalty rate at the higher rate."