Apple Music pays rights holders a penny per song streamed

Shawn Knight

Posts: 13,167   +132
Staff member
Bottom line: Apple in a letter to artists, record labels and publishers said it pays a penny per song streamed on its platform. That may not sound like much, but in an apples to oranges comparison, it's roughly twice what Spotify pays on a per stream basis.

The document, which was seen by The Wall Street Journal, adds a bit of transparency to an industry that has traditionally been rather secretive with regard to how finances are managed.

With the move, Apple is also firing back at rival Spotify. According to The Journal, Apple’s penny per stream is roughly double what Spotify pays rights holders per stream.

Spotify doesn’t dispute the fact that at face value, it appears as if they pay less per stream than the competition. Instead, the company argues on its recently launched Loud & Clear portal that the average subscriber on Spotify listens to more music per month than on other services. “That means more listeners discovering more artists, more opportunities to deepen engagement with listeners, and more chances to convert them into fans who buy tickets and merch,” Spotify notes.

The company also notes that it operates in more countries where prices for its service are lower. “Meeting listeners at an affordable price for them is the way to generate revenue from these markets that wouldn’t have been captured otherwise.”

Last but not least, Spotify is different from most of its competitors in that it offers a free ad-supported tier.

“While the ad-supported service doesn’t generate as much revenue as the Premium service per user, we’ve conducted extensive testing that consistently shows that when we take the free service away, those listeners turn to non-revenue-generating alternatives, meaning the collective music industry is missing out on revenue,” Spotify said.

Collectively, it all impacts the revenue-to-streams ratio.

It’s also worth clarifying that both Apple and Spotify pay rights holders, which can include record labels, publishers and distributors. These entities, in turn, are the ones that pay artists based on their various recording, publishing and distribution agreements.

Images courtesy hurricanehank, nikkimeel

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duckofdeath

Posts: 364   +459
Can we get a statistic on how much, on average, Apple is getting paid per song played on Spotify? Get some context for the impact of the Apple tax?
 

Bulllee

Posts: 179   +123
Can we get a statistic on how much, on average, Apple is getting paid per song played on Spotify? Get some context for the impact of the Apple tax?
That's a long and lonely path but it would seem there has been an appetite to buy up the back catalogues of late.
 

yukka

Posts: 928   +104
I don't like that my Spotify subscription pays artists that I don't listen to and pays the ones I do listen to barely anything. At least Apple music pays the artist a penny for song I listen to - it does make me consider switching over to Apple music just to better support those artists.
 

brucek

Posts: 802   +1,104
TechSpot Elite
Can we get a statistic on how much, on average, Apple is getting paid per song played on Spotify? Get some context for the impact of the Apple tax?
Apple said it is paying out 52% of subscription revenues, so roughly speaking, Apple is getting two pennies, giving one to the rights holders, and keeping one for itself.
 

duckofdeath

Posts: 364   +459
Apple said it is paying out 52% of subscription revenues, so roughly speaking, Apple is getting two pennies, giving one to the rights holders, and keeping one for itself.
That wasn't what I asked. I asked, how much is Apple making on subscriptions on Spotify, compared to the creator of the actual content? An open ended non-answer isn't telling anything.
Just to clarify it a bit more: Apple's 48% stake is 100% tax free. The rest, is split up between all parties and all of those parties pays taxes on that money. Apple files that "expense" as a loss and gets to deduct even more taxes on other things....
 

brucek

Posts: 802   +1,104
TechSpot Elite
That wasn't what I asked. I asked, how much is Apple making on subscriptions on Spotify, compared to the creator of the actual content? An open ended non-answer isn't telling anything.
I'm sorry you have me very confused.

As far as I know, Apple makes nothing from subscriptions on Spotify, which is an entirely separate company. Possibly there is/was an opportunity for the standard Apple app store 30% tax for someone who subscribed and paid for Spotify using the Spotify app on an iOS device, but I'd be surprised if this is a significant chunk of Spotify's audience. I'm not sure they even let you do this any more.

Meanwhile Apple has its own competing music streaming service, Apple Music, costing about $10 per month after a free trial. Apple does not release its total revenue separately, but one estimate I saw puts it at roughly $4 billion in 2020. Of that amount, 52% is due to the creators, and 48% is kept by Apple. From that share Apple has to cover its server, bandwidth, software, advertising, marketing, and other expenses, and possibly an additional payment Apple makes to cover users in the free trial status, I don't have details on that.

Creators also have expenses, on which I have no available breakdowns, but if you want a semi-educated guess the highest profit margin in this whole shebang is the owner of the song writing copyright. There's occasional hole-in-one stories of the writer who creates an evergreen classic in a single sit down session, and can make millions from it. Of course far more often a song earns little. The individual musicians and sometimes even the singer, if they are not also the writer, may not earn a lot even on a hit.

If this is still an "open ended non-answer" could you maybe explain a little more precisely what you are trying to learn?
 

kiwigraeme

Posts: 324   +255
I don't like that my Spotify subscription pays artists that I don't listen to and pays the ones I do listen to barely anything. At least Apple music pays the artist a penny for song I listen to - it does make me consider switching over to Apple music just to better support those artists.

The RIAA take statistics of how often songs are played on radio stations etc and apportion licensing fees out in proportion.

So I assume Spotify will apportion like say Youtube on streams/views . The other ways would be a licensing model - I imagine Netflix does a mix of the two. Like bookshops some mags on consignment most books purchased outright
 

yukka

Posts: 928   +104
The RIAA take statistics of how often songs are played on radio stations etc and apportion licensing fees out in proportion.

So I assume Spotify will apportion like say Youtube on streams/views . The other ways would be a licensing model - I imagine Netflix does a mix of the two. Like bookshops some mags on consignment most books purchased outright

I’m just thinking I pay £10 a month and barely 0.0010p goes to artists that I listen to. They have to have an insane number of streams played to get a decent share along with the most popular music but I’m using streaming instead of buying their albums. If I listen to their album loads, they should directly benefit more than they do at the moment
 

brucek

Posts: 802   +1,104
TechSpot Elite
I’m just thinking I pay £10 a month and barely 0.0010p goes to artists that I listen to. They have to have an insane number of streams played to get a decent share along with the most popular music but I’m using streaming instead of buying their albums. If I listen to their album loads, they should directly benefit more than they do at the moment
That's not right. If you were the only customer, you'd pay £10, and £5.20 would go to the artists you listen to. If you listened to just a single album, that artist would get the full £5.20. It wouldn't matter whether you listened to it once or 1,000 times (Also true if you bought their album - you'd pay say £15 once, still giving ~30% to a retailer, not £60 over the course of the year.)

Streaming has been embraced by the music industry because the overall result is that more total money comes in. Prior to streaming, there tended to be a steep decline in # of albums purchased per year as people aged into adulthood. Then there was the impact of easy piracy. Streaming reversed those financial fortunes by causing a much larger audience to stay subscribed, with most of that audience incurring annual subscription fees in excess of what they'd have paid for individual albums.

So while it might be true for you personally, if you were that core involved audience still buying > 8 albums year, that they'd make more from album sales; from the total audience they make much more by having everyone including casual listeners pay their small monthly subscription on auto-pilot.
 

yukka

Posts: 928   +104
That's not right. If you were the only customer, you'd pay £10, and £5.20 would go to the artists you listen to. If you listened to just a single album, that artist would get the full £5.20. It wouldn't matter whether you listened to it once or 1,000 times (Also true if you bought their album - you'd pay say £15 once, still giving ~30% to a retailer, not £60 over the course of the year.)

Streaming has been embraced by the music industry because the overall result is that more total money comes in. Prior to streaming, there tended to be a steep decline in # of albums purchased per year as people aged into adulthood. Then there was the impact of easy piracy. Streaming reversed those financial fortunes by causing a much larger audience to stay subscribed, with most of that audience incurring annual subscription fees in excess of what they'd have paid for individual albums.

So while it might be true for you personally, if you were that core involved audience still buying > 8 albums year, that they'd make more from album sales; from the total audience they make much more by having everyone including casual listeners pay their small monthly subscription on auto-pilot.

Not sure what your point is. There is a load of money I give to Spotify each month. It doesn't get split between the artists I listen to. It gets spread over the entire ecosystem so I am paying for people like Ed Sheeran cos several million people decided to stream his album on repeat for six months compared to my six or seven plays of my favourite cluster of albums. If Ed Sheeran is played by the ecosystem so much that the pool of all the song plays in the world put together reduces the price per play to 0.000002c then my bands get 0.000002c a song. 200 songs that I play a month, this isn't scratching the surface of paying them a penny. This is why Apple saying straight out that all songs get 1p a play is attractive.
 

brucek

Posts: 802   +1,104
TechSpot Elite
Apple is saying that currently the math works out to 1p a play, but not that that's what the actual terms of their deal is. They are still a revenue-split deal based on total subscription revenues being divvied up based on pro-rata share of listens.

You are right that you are part of an ecosystem. If you really only want to listen to one artist and pay one artist, maybe you can get that one artist a little more money by buying their albums instead of subscribing -- for maybe a few years. They may actually still lose out compared to a lifetime of your subscribing and listening, vs. you buying their albums once and having them to enjoy in pristine digital quality for the rest of your life while never paying for them again.

You over-thinking the math of the ecosystem is kind of pointless though. Your one vote as one listener counts. Yes, fractions of your pennies are going to Ed Sheeran, just like fractions of his biggest fan's pennies are going to smaller indie artists too. The math works out as a whole, and the revenue pie is much bigger as a whole, because there's much more money coming in.
 

captaincranky

Posts: 16,755   +5,486
This thread reminds me of an old joke I heard a long, long, time ago.

"Two (ethnicity omitted) merchants were walking down the street. The first one, Mosche, says to the second one, (Israel), ", Izzy, how do you lose a dollar on every item you sell and still Turn a profit? Izzy throws his hands up toward the heavens and says, "volume, that's how I do it, volume".
 

waclark

Posts: 51   +42
I'm sorry you have me very confused.

As far as I know, Apple makes nothing from subscriptions on Spotify, which is an entirely separate company. Possibly there is/was an opportunity for the standard Apple app store 30% tax for someone who subscribed and paid for Spotify using the Spotify app on an iOS device, but I'd be surprised if this is a significant chunk of Spotify's audience. I'm not sure they even let you do this any more.

Meanwhile Apple has its own competing music streaming service, Apple Music, costing about $10 per month after a free trial. Apple does not release its total revenue separately, but one estimate I saw puts it at roughly $4 billion in 2020. Of that amount, 52% is due to the creators, and 48% is kept by Apple. From that share Apple has to cover its server, bandwidth, software, advertising, marketing, and other expenses, and possibly an additional payment Apple makes to cover users in the free trial status, I don't have details on that.

Creators also have expenses, on which I have no available breakdowns, but if you want a semi-educated guess the highest profit margin in this whole shebang is the owner of the song writing copyright. There's occasional hole-in-one stories of the writer who creates an evergreen classic in a single sit down session, and can make millions from it. Of course far more often a song earns little. The individual musicians and sometimes even the singer, if they are not also the writer, may not earn a lot even on a hit.

If this is still an "open ended non-answer" could you maybe explain a little more precisely what you are trying to learn?

You are correct, Spotify does not allow upgrading the sub to Premium from within the App. Likely due to Apple's "tax" if someone were to do this.

As for songs and royalties, generally speaking the song writer or copyright holder will make a lot. But so can the performing artist if their version becomes a hit. It's really complicated because in some cases the singer or musician may be hired as a session player and get paid a flat fee. Sometimes the writer and performer are the same so they actually double dip. They get paid for the song writing but also for the performance.

I don't think song writing is particularly time consuming or difficult. Getting a hit song is a bit of skill, luck and frankly timing. But the payout for a hit far exceeds the effort that went into it. My daughter had a friend in school whose father wrong one hit song for a nationally known group. While he wasn't super rich, he was living a pretty darn good life based on maybe a couple day's worth of work.

I personally feel music licensing and royalties are broken. As a business owner I pay 3 different services every year on the off chance that I might play music they license. There's no actual accounting of whether I played any songs much less how often I played them. Just a flat fee every year, forever. Oh, and did I pay to buy the songs on CD or digitally? Yup, but I still pay a fee to play them.
 

waclark

Posts: 51   +42
How much does iHeart radio pay artists per streamed song?
Don’t know. Are you asking a question or trying to make a point? When you consider all the possible means a song might get played and all the ways artist and song writers get paid, it adds up to a lot.