Apple's New Music Royalty Proposal Would Make Streaming Costlier for Free Services Like Spotify

Apple has submitted a proposal to the U.S. Copyright Royalty Board calling for a simplified way to pay songwriters and music publishers for streaming music, according to Billboard. While the change would benefit labels, artists and publishers, it would make it more difficult for streaming services like Spotify to continue offering free tiers.

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Apple, which has always had a gift for creative simplicity, wants to make this process easier and more transparent, according to a copy of the filing obtained by Billboard. The company’s proposal to the Copyright Royalty Board suggests a simple, “all-in” statutory rate that would be “fair, simple and transparent, unlike the incredibly complicated structure that currently exists.”

Apple's suggested rate is 9.1 cents per 100 plays, which would make the songwriting royalties for 100 streams equal to the royalties for a single song download. However, the change would make it more expensive for companies like Spotify and YouTube to offer free music tiers.

The current system sees streaming companies paying songwriters and publishers between 10.5 and 12 percent of their revenue using what Billboard terms a "complicated formula." The money is then divided into public performance and mechanical royalties, which is then paid to publishers and "collected societies." Currently, Apple and other streaming music providers don't have to pay publishers the statutory rate set by the Royalty Board because they can negotiate their own deals. However, negotiations between publishers and streaming services would start at a different place should Apple's proposal become rule.

The Copyright Royalty Board, which is made up of a panel of three judges, is still in the early stages of determining potential statuary rates for 2018 to 2022 so it's unclear whether Apple's proposal would take hold or ever come to be.

While Apple Music has garnered about 15 million paying subscribers in the year since its launch, rival Spotify has twice as many, with the company citing Apple's entrance into paid music streaming as a boon to its business. Despite user and revenue growth, Spotify continues to operate at a loss due to expensive royalties and revenue sharing with music labels, with recent losses growing 10 percent to $195.7 million.

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Top Rated Comments

Junipr Avatar
103 months ago
Apple's lawyers are working harder than their engineers on this product
Score: 59 Votes (Like | Disagree)
AppleScruff1 Avatar
103 months ago
Sounds simpler and fairer; kicking Spotify and Google is just an added side bonus ;-)
Yeah, it will be much better for the consumer when they have a choice of Apple or Apple. We know how Apple loves to pass on the savings to their loyal followers.
Score: 53 Votes (Like | Disagree)
daabido Avatar
103 months ago
Sounds simpler and fairer; kicking Spotify and Google is just an added side bonus ;-)
Score: 46 Votes (Like | Disagree)
Mac Fly (film) Avatar
103 months ago
Apple's lawyers are working harder than their engineers on this product
All the naysayers on MR should start their own technology company. You clearly are more capable than Apple. I'm not saying Apple can't be criticised, it's the incessant pissing and moaning in every post that gets me.
Score: 29 Votes (Like | Disagree)
RowellE Avatar
103 months ago
I misread "statutory rate."
Score: 22 Votes (Like | Disagree)
Abazigal Avatar
103 months ago
This is sooo not gonna fly.

First of all this is not about artists making any money cause 9.1 cents on a 100 streams is an insult but artists have accepted the offer to stream their music so who give a crap about them. They have blatantly chosen to make their money on tours and from merchandise if they have an easy 360 contract.

This hits the consumer the hardest cause they might not have a free option.

What I don't get here is how come the CRB only consulted Apple instead of other leading music streamers. That is the sole reason why this proposal will go down.
I guess the question then is - why do people feel entitled to a free music streaming option?

Spotify is still making a loss, even as musicians complain of not being paid enough. I am not sure a company like Spotify is exactly the best person to comment on such matters.

If anything, it just shows that a free music streaming option was likely never financially viable to begin with, seeing how it is causing Spotify to haemorrhage losses, and needs to be subsidised by the paid tier. Free music to the masses sounds like a great thing, but not when it comes at the expense of devaluing music and destroying value. It has been a nice experiment, but maybe a free streaming tier which clearly can't generate enough revenue to support itself simply isn't the way moving forward.

Yeah, it will be much better for the consumer when they have a choice of Apple or Apple. We know how Apple loves to pass on the savings to their loyal followers.
I didn't switch to the Apple ecosystem to save money. I switched precisely because I was willing to pay to get a great computing experience, and Apple simply offered the more compelling option.

If I need to pay more to get a better listening experience from Apple Music, I will.
Score: 18 Votes (Like | Disagree)