Apple Inc. and their new streaming service backed off its plan to not pay royalties during free trials of its new Apple Music service hours after a public protest by powerhouse pop star Taylor Swift.
Early Sunday morning, Swift penned an open letter to Apple saying that it wouldn’t allow her latest album, “1989,” to be included in the streaming service. Taylor’s “1989” album has been in Billboard magazine’s top five in sales since its release late last year said she strongly objected to Apple’s decision not to pay artists royalties during the three-month trial periods that customers will get for the new service.
“I find it to be shocking, disappointing, and completely unlike this historically progressive and generous company,” she wrote in an open letter posted to her Tumblr page. “We don’t ask you for free iPhones,” she concluded. “Please don’t ask us to provide you with our music for no compensation.”
But then, a tweet posted on the account belonging to Eddy Cue, Apple’s senior vice president who oversees Internet services and software, announced: “#AppleMusic will pay artist for streaming, even during customer’s free trial period.” An Apple spokesman confirmed that the company has changed course.
Apple isn’t Ms. Swift’s only beef with streaming music providers. Last fall, she pulled her entire catalog from Spotify after a similar dispute over “1989.” She later joined musicians such as Jack White and Madonna in allowing her music, except for the latest album, which is to be played exclusively on Jay Z’s streaming service Tidal. Apart from Spotify, her catalog remains available on all other streaming services that require a paid subscription, with the exception of “1989.”
Music industry analyst Mark Mulligan said it isn’t uncommon practice for streaming services to not pay royalties during a trial period, but those are typically startups struggling to get off the ground, not the most valuable company in the world. “This is less a case of the business practice being questioned, it’s whether Apple itself, ideologically, should have that type of business benefit applied to it in the way some of the other services do,” Mr. Mulligan said.
While Ms. Swift was the biggest star to fight back against Apple’s strategy, other influential industry groups also voiced their concerns. Beggars Group, an independent music company whose record labels include XL Recordings, home to singer Adele, posted a message on its site last week saying the company hadn’t yet reached an agreement with Apple. “Whilst we understand the logic of their proposal and their aim to introduce a subscription-only service, we struggle to see why rights owners and artists should bear this aspect of Apple’s customer acquisition costs,” the company said.
With Apple Music, launching June 30th, the company will challenge early streaming services Spotify AB, Pandora and others. The company is betting that it can once again push its giant customer base to a new way of listening to and paying for digital music. In 2003, its iTunes service transformed the music landscape, and it now accounts for an estimated 80% to 85% of music downloads globally. Following upstarts such as Spotify into the recurring subscription model offers the prospect of more revenue for the company and for the largest music labels.
The Apple Music service will cost $10 a month, but won’t include a free category, unlike Spotify, which offers an ad-supported access in addition to its paid subscription. Some artists and smaller labels have complained about low royalty rates for streamed music, over which they have little control. Last December, a single play on Spotify’s paid service generated 0.68 of a cent in royalties, according to Audiam, a company that helps music publishers collect digital royalties. Post-trial period, Apple is paying slightly more than Spotify to music owners. Apple is paying 71.5% of revenue vs. 70% from Spotify (premium tier).
Ms. Swift said in her letter: “These are not the complaints of a spoiled, petulant child. These are the echoed sentiments of every artist, writer and producer in my social circles who are afraid to speak up publicly because we admire and respect Apple so much. We simply do not respect this particular call.”