Apple is offering its music service free on a three-month trial, but after that, users will have to pay $10 a month for the service. Of the $10 paid by subscribers, over $7 will go to music labels, music publishers and other music owners. Also during the three months of the trial period, the Cupertino, Calif.-based company will not pay anything, Apple executives told Re/code.
What is Apple actually paying to music labels?
Apple’s not paying anything to music labels during the free trial period may have been an issue for music labels during the negotiations for the new service. However, an Apple executive said that the payment from the iPhone maker is slightly higher than the industry standard, which will compensate for the lengthy trial period. Generally, subscription services offer a free one-month trial.
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Apple is not doing anything surprising in giving 70% of the revenue from the service to industry music observers, as this is a standard percentage. However, just last week, the Apple Music contract was leaked online. It said that the iPhone maker will pay 58% of its revenue.
To clear up the confusion, a report from Re/code gives out the actual numbers, citing Apple executives. Robert Kondrk, the Apple executive who closed the deal, along with media head Eddy Cue, told Re/code that the company pays 71.5% of Apple Music’s subscription revenue in the U.S. In other areas, the number can vary but will average 73%.
The payment goes to the owner of sound recordings on Apple Music and to those who own the rights to songs’ underlying compositions. However, the fund may or may not be given to the musicians who recorded or wrote the songs for the simple reason that their payouts are governed by byzantine contracts with music labels and publishers.
Is Spotify better?
Spotify is one such company that has offered a $10 month paid service clubbed with free versions that offer unlimited, ad-supported, on-demand music on desktop PCs and more restricted free music on phones. The iPhone maker has attacked Spotify’s freemium model, and a top label executive even asked Spotify to stop the free service, says the report.
Apple is pitching to the music industry that its seven-tenths of a dollar offer will be worth much more than Spotify’s seven-tenths of a dollar in the long-run because its free service will not be competing with the paid service, and also it will sign up many more subscribers than Spotify.