Apple: Streaming Royalties Can Be Simpler, Help Artists

Only July 15, Apple filed a proposal with the U.S. Copyright Royalty Board, suggesting ways to simplify the complex rules that govern how songwriting royalties are paid out by streaming platforms like Spotify, Pandora and YouTube.

The Copyright Royalty Board is a three-judge American body that will determine the licensing rates according to which streaming companies must pay music publishers between 2018 and 2022. At the moment, the Royalty Board uses a formula for rate-setting that is based on separating ‘mechanical rights’ from ‘performance rights’ royalties in any given piece of music.

Apple has proposed altering this model significantly, combining both types of royalties under a single statutory formula. The proposal would (not coincidentally) impact the way Spotify, Pandora and Apple’s other primary competitors are able to do business.

As of now, songwriting royalties are paid out on the basis of overall revenue that streaming services collect. Unlike Apple Music – which can only be accessed through monthly $10 subscription fees – the majority of Spotify users (70 million) prefer listening to the service for free. This dramatically reduces the amount of compensation that companies like Spotify must give to music publishers.

Under Apple’s proposal, streaming companies would pay 9.1 cents in songwriting royalties for every 100 times that a song is played. The system would consequently demand much higher payments from companies like Spotify, Pandora and YouTube.

 

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The changes would not impact Apple, however, since statutory rates only apply to companies that have not brokered private deals with music publishers. Apple already struck such deals with the industry’s major publishers, agreeing to pay them slightly higher-than-average rates.

Not surprisingly, companies like Spotify and YouTube are opposed to paying increased fees for the music delivered on their platforms. They claim to have already compensated rightsholders with billions of dollars in royalty payments. Google, Spotify, Pandora and Amazon will likely submit their own rate-setting proposals to the Royalty Board later this week.

In contrast to digital streaming services that offer free content to users, Apple’s subscription-only model has attracted support from some of the industry’s biggest artists, including Taylor Swift. They agree with the position that Apple has submitted to the Board, asserting that even free music streams have “inherent value”, and that “freemium” services such as Spotify’s do a disservice to artists when users cannot be prevented from listening to music for free.

“We agree 100 percent with artists that they should have the right to decide where their content is available — whether it’s free or when it’s free, when it should be paid or how much it should cost,” says Apple’s Senior VP of Internet Software and Services, Eddy Cue. “We’ve always, from day one, felt that this is their content and they should decide how they want to make it available.”

Apple Music currently has 15 million paying listeners. Spotify’s own premium service claims 30 million subscribers. Pandora One reports 4 million subscribers, while Tidal reports approximately 1 million.
 

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To read an article by the New York Times, who originally obtained Apple’s CRB filing, click here.