Apple Music Reveals Royalty Rates, Outpaces Spotify in Per-Stream Payouts

A recent disclosure by Apple has shed light on the often-opaque world of music streaming royalties, revealing that Apple Music compensates artists significantly more per stream than its primary competitor, Spotify. The information, initially reported by the Wall Street Journal, stems from a letter sent to creators via Apple Music’s artist dashboard and subsequently published by 9to5Mac.

According to the disclosed figures, Apple Music pays artists an average of one cent per stream. While this figure may still seem relatively low, it represents a considerable advantage over Spotify’s royalty rates. The Wall Street Journal reports that Spotify pays artists between a third and a half of a cent per stream. This means that, on average, Apple Music provides artists with at least double, and in some instances, triple the per-stream revenue compared to Spotify.

However, the complexities of music royalty payments extend beyond the simple per-stream calculation. The Journal emphasizes that artists are not directly compensated by the streaming platforms themselves. Instead, payments are channeled through rights holders, such as record labels, distributors, and publishing companies, with whom artists have contractual agreements. This intricate system implies that 50 streams of an artist’s song do not necessarily translate to 50 cents directly deposited into their bank account. Various contractual obligations, revenue sharing arrangements, and other factors can significantly impact the final payout received by the artist.

Neither Apple nor Spotify have publicly responded to requests for comment regarding their specific payment terms for creators. Key questions remain unanswered, such as whether these platforms have minimum play-time stipulations for a stream to qualify for royalty payments, and what proportion of a song must be listened to before it generates revenue for the artist.

Despite the complexities, Apple’s disclosure arguably puts Spotify in a less favorable position. Spotify, which boasts a much larger user base, operates on a "freemium" model, offering both ad-supported free access and premium ad-free subscriptions. As of last month, Spotify reported having 345 million users, with 155 million of those being paid subscribers. In contrast, Apple Music is estimated to have approximately 72 million subscribers as of June 2020, based on data from Statista. Apple Music primarily functions as a paid subscription service, priced at $10 per month, with the exception of free trial periods. Spotify’s premium tier also mirrors this pricing, offering ad-free listening for $10 per month.

In response to growing concerns and scrutiny regarding its streaming economics, Spotify launched its "Loud & Clear" transparency initiative last month. This initiative aims to address questions surrounding its payment model and how it distributes royalties. One area of focus is why per-stream rates appear lower for Spotify compared to other streaming services.

On its "Loud & Clear" website, Spotify attributes the seemingly lower per-stream rates to several factors. These include its expansive global audience, which influences the revenue-to-streams ratio, the high volume of streams per listener, and the presence of its ad-supported tier. Spotify claims that its ad-supported tier ultimately benefits the music industry by attracting users who might otherwise resort to "non-revenue-generating alternatives," effectively depriving the industry of potential income.

"There are a number of factors that contribute to that ratio looking small, which we understand can seem problematic," the site states. "We don’t believe it is; we are confident our model is maximizing revenue for everyone."

Apple, in its recent letter, acknowledged that the value of a stream "varies by subscription plan and country" but clarified that it averaged about one cent per play for Apple Music individual plans last year.

“At Apple Music, our focus remains on artists and songwriters and finding new and innovative ways for all creators to make a living from music,” the company wrote. “With Apple Music, music fans around the world enjoy an uninterrupted ad-free experience while knowing their data is kept private and used only to enhance the overall music experience for them.”

The contrasting approaches of Apple Music and Spotify highlight a broader debate surrounding the sustainability of the current music streaming landscape. While Spotify’s "freemium" model allows for broader accessibility and attracts a larger user base, its lower per-stream rates raise concerns about whether artists are being fairly compensated for their work. Apple Music’s focus on paid subscriptions and higher per-stream rates, while potentially limiting its reach, may offer a more viable path for artists to generate revenue in the digital age.

The impact of these varying payment structures is further compounded by the complexities of rights ownership and distribution agreements. Artists often receive only a fraction of the revenue generated by their music, with the majority flowing to record labels, distributors, and other intermediaries. The lack of transparency in these agreements and the often-unequal bargaining power between artists and rights holders contribute to the challenges faced by musicians seeking to make a living from their craft.

As the music streaming industry continues to evolve, it is crucial for platforms, artists, and rights holders to engage in open and honest dialogue about fair compensation and sustainable business models. Transparency in royalty payments, equitable distribution agreements, and innovative approaches to artist support are essential to ensure that musicians can continue to create and share their art with the world. The Apple Music disclosure is a step in that direction, opening up a crucial discussion that has been going on behind closed doors for far too long. Further scrutiny and reform are needed to build a more sustainable and equitable future for the music industry. The future of music hinges on finding a way to fairly compensate the creators at the heart of the industry.