Posted on 06/25/2015 6:02:49 AM PDT by Mad Dawgg
The likes of Merlin, AIM and IMPALA have endorsed the Cupertino giant’s new offer to the indies, after Eddy Cue did an about-turn and offered them royalty compensation for the platform’s upcoming three-month trial.
But the question on the lips of the industry is a familiar one… how much?
Reports suggest that the indies are receiving the equivalent of $0.002 per stream from Apple, and MBW’s sources corroborate this.
But there’s an important extra detail, numerous indies have told us: this is actually a pre-tax figure, certainly in Europe.
That means that in the UK, for instance, the $0.002 would see a further 20% knocked off in VAT – down to $0.0016.
And it will be even worse news in the likes of Ireland (24%), Norway/Sweden (25%), Spin (21%) and Italy (22%).
We know that Apple is paying 58% of Apple Music income to labels in the US – with 13.5% going to publishers – so some very rough maths would suggest that independent publishers would get somewhere around $0.00047 per stream for the three-month free trial.
(Excerpt) Read more at musicbusinessworldwide.com ...
Apple is said to have pulled all civil war games from ITunes because of the confederate battle flag
Question is, what is that relevant to other streaming services are paying?
You can’t expect an individual playing of a song to one individual to have a high payment rate in any medium.
Broadcast radio doesn’t pay a performer jack for their song when they play it... the songwriter and the publisher get paid but not the performer, the amount varies on various factors.
The closest I could come up to for broadcast radio was the college radio format which is a minimum of 6 cents is paid to the songwriter and publisher whenever a college radio station plays a song. So if you assume a college radio station has a listening audience of a few hundred to a few thousand people at most at any time, you wind up with a payment in the ballpark of what Apple is said to be paying.
Artists, other than the very top tier guys, don’t get paid much at all, they get very little off their record sales etc... touring is where they make most of their $$.
Obviously once you are an established successful player you can negotiate better terms and self produce etc etc and make more money for yourself form your song sales etc.
MC Hammer gave a good interview about this years ago, when he initially turned down the record company who came calling for him because he knew he could sell a few 10s of thousands of CD’s he’d self produced out the back of his car and make more money that selling millions of them as a signed artists, its part of the reason he wound up making so much money (although he blew it all anyway) of such a short career... he was getting far far higher percentage of sales that most beginning signed artists.
Apples offer is the going rate for streaming pay outs.
What is unbelievable about this? Do you know what performers get paid when their song plays on a radio station?
ZIP, not one thin dime.
The publisher and songwriter get paid a cut that varies based on various factors but the actual performer doesn’t get a penny. I don’t see you skewering Clear Channel.
You judge the payment vs other streaming services, and that’s the only model you can judge it by. Until I see a comparison chart, being outraged over the pay scale is silly.
Lets do the math shall we? Apple Music is said to cost between $10 and $15 a month depending on the tier you use. So, lets see a typical song is 3 minutes long. Using spotify as a baseline, just because I could find some actual numbers on it, the claim is about 2 hours of music listening per day. So, that’t 40 songs per day listened to. The typical month is 30 days long, so that 1200 songs listened to per month... so lets just do some quick math here...
If you are the $10 tier and apple were to pay 1 penny per song you listened to, they would be losing $2 per subscriber per month just on the cost of the content... let alone the cost of actually running the business. 1/5 of a cent per month that drops the raw cost of the content to 2.40 a month. So that’s about 25% of the revenue is going to content costs, that’s not to me outrageous or stingy. Anyone who things it is, hasn’t run a business.
I've been in business since I was 17 years old. I did so by not screwing the customer OR the people I work with. When I hire a guy to install flooring I don't charge 20 bucks an hour to my customer then turn around and pay 5 bucks an hour to the guy I hired to provide the service.
Exactly like with most music from big labels.
That’s what I assumed after I ran the numbers
Apple is paying 100% of the infrastructure costs and providing the marketplace for these tracks to be heard at all. 30% of revenue isn’t unreasonable, especially when the publishers and artists get their 70% of revenue regardless of costs. That’s pretty standard in digital publishing.
Sorry, but I don’t see how you think anyone is getting screwed. What is your raw material cost to run your business? I can tell you in most industries its the 20-30 percent range.... and 30% is on the higher end. That’s not Labor, that’s not taxes, that’s not utilities, regulatory cost, etc, that’s the absolute raw materials you need to operate... cost of goods if you will. Where apple is based on the numbers I run is right in line with that.
They are charging $10 per month per user, and average user is likely to consume about $2.40 of that in content costs based on the reimbursement model of .002 per stream. (2 hours a day average listening, 30 days average per month, 3 minute average song length) that’s 24% of of their revenue dedicated to “cost of goods”. That’s not out of line at all, nor is it screwing anyone.
Apple has to pay all its labor, upkeep, infrastructure, administrative and other things out of the remainder of the funds and then sees a profit, a roughly 25% raw material cost is not remotely out of line for any business I have been involved in.
And for the trial period, that means Apple is losing $2.40 per month per user in content costs, plus all of their infrastructure and delivery costs (plus application design, development, and maintenance), as the revenue per user is zero.
You are comparing apples to oranges, you are trying to apply a consulting/general contractor model to a cost of goods business. Typical contractor type of model you are operating is a 2/3 to 1/3 typically.. that’s a different model. Go ask the guy you hire to actually do the work how much he plans on spending on raw materials for the job, if its over 30% he won’t be in business long.
Your business is basically that of a broker, you aren’t directly doing any of the work, just booking the job and then passing it along to someone else to provide the labor and taking a cut for brokering the deal. That’s a completely different model. If you want to have apples equivalent to that model, thats the 30/70% split they have on the sale of digital content such as apps and music on itunes. They keep 30% of the sale and in return they provide the marketplace and do all the things needed to make a sale happen. That business is comparable to the model you are using and its breakdown is about the same.
I see, so since I didn't actually install the carpet I should not take a large cut. I agree totally by the way.
So then tell me what did Apple do to actually make the music they are using and paying $0.002 a play on?
Yes I understand that, what I am pointing out to the clearly unaware, is that the pay structure they are offering is not outrageous or incredulous, in fact I’d bet its pretty much par for the streaming media industry.. to hit the price points of $10 a month or $15 a month for unlimited streaming type setups they could not operate without going out of business by paying much more than that.
I am always amazed at how insanely ignorant most folks are about general business operations in a society, and a site, that claims to be so capitalistic. End of the day most folks have no idea how small most margins are because they just see the end game of they made a huge number at the end of the year in profits. They never bother to see how much capital actually flowed through the model to make those profits.... Large scale is the only reason they make those large profits, most businesses are spending a very very high percentage of their revenues on operations, the percentage of their revenues that are actual profits, in most industries are very very small. Its economies of scale that make those very small percentages add up to big numbers.
I really feel sorry for Taylor Swift. The royalties she could be losing from Apple might cost her having another mansion or her own private island. The real losers are the song writers who get paid pittance while the artists like Swift use their works to make millions.
They don't make the content. They provide the marketplace and infrastructure for that content to be consumed. That's their value added.
Or Netflix's. Or Pandora's. Or...
Yeah they just make the big bucks off of it. And at the same time while they rake in that fat stacks it is just another reason for customers to buy less physical Media which is Ironic because it is where Indies are starting to actually make a decent living.
I didn’t say you couldn’t take a cut, I am not begrudging you your business in the least, you are providing a service that is beneficial to both ends... the actual contractor doesn’t have to spend his time chaising down work and making bids that for the most part will not actually turn into work, nor spend money on marketing or other costs that you are bearing. And the customer doesn’t have to deal directly with figuring out who is a good carpet installer and who’s not, and whos a drunk or on drugs, or ex con, etc etc etc. And if the sub does disappear, that’s your problem to deal with not theirs etc.
I have no issues with you making your money or taking your cut. What I am trying to explain to you is that streaming digital content is a completely different business model, they are not putting a customer and a seller together, they aren’t simply brokering a single transaction. They are providing a customer with a service.
That service is the fully on demand delivery of digital content whenever they want. To make that model work, you are in a different category than brokering a deal between a provider and a buyer. That model, which apple does do, millions if not billions of times a day via iTunes has virtually the same financial breakdown of your business. Apple keeps 30% and the product maker gets 70% gross numbers. So right around 1/3 to 2/3 generalization.
The economics of digital publishing are not the same, lets look at the economics of it. If we attempted to apply the broker model to digital streaming, that would mean that Apple would pass on $6.50-$7 per month per subscriber to the content provider, leaving just $3 to $3.50 a month gross for apple to cover all of its infrastructure, labor, regulatory, marketing and all other costs, the math doesn’t work. Apple has to have and keep running enough servers to keep all those streams going and available 24/7. They have to pay for the bandwidth to make sure all that outbound data can get to its subscribers without buffering or delay.. it needs to constantly update its databases and increase storage so that new content being provided can be stored, and retrieved in a timely fashion to potentially millions of users simultaneous etc etc etc. Apple is doing a lot more than simply being a broker.
Now is the content provider actually playing the music personally every time its streamed? Nope.... but I bet your subs are showing up for work and laying that carpet every time you book them for a job. Your sub has no way to leverage any economy of scale, other than to hire new employees, and increase his overhead... But a recording can be streamed to 1000 people at one time, and the artists who made it don’t have to put in one more second of work, beyond whatever time it took to initially create it. If your subs could through the magic of imagination, somehow carpet 1 room then instantaneously copy that carpeting to any other room anywhere anytime without actually doing any more labor or needing any more materials then they did for that very first room, do you think costs would go down?
All I am trying to point out here is that Apple is not screwing anyone here, this service is in a different type of model than your business operates, your business model works great for the type of business you are doing, theirs works for the model of business they are doing, just because the economics are different between the two does not mean that one model is screwing folks while another is not.
Your viewpoint is just skewed incorrectly. You are correct apple didn’t create that content they are paying .002 per song to stream, just like the artist who made that song did nothing to build up the infrastructure, labor, utility, storage, network, marketing,etc that allows their song to reach the end customer subscribed to apple music in the first place. Just because the economics are different doesn’t mean that someone is getting screwed.
But in this case it does. The more streaming grows the more physical AND digital content sales shrinks.
This is already happening. And Indies make much more (as you have pointed out) on actual sales. So yes Artists ARE definitely getting screwed and Apple rakes in the big bucks while the Artists get the pennies err I mean two fifths of a penny.
Taylor Swift pretty much records only songs SHE WRITES.
She owns her music lock, stock, and barrel.. that's where her power comes from.
She once told Disney to take a hike when they wanted a piece of her publishing for putting her own music into a project they proposed using her.
The artists make approximately diddly-squat if no one listens to them. Note that they’re not forced into this channel - if they can make a better go of things without it, power to them.
You’re comparing record sales to radio play. Two totally different things, and the former is typically driven by the latter. Also, there is no way indies are making more on physical disc sales, after costs, than they’d make selling the same content digitally.
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