Tuesday, June 23, 2015

Taylor Swift takes a bite out of Apple

What impressed me is that a 25 year old woman took a $729 billion dollar company to task and made them bow at her feet in less than 48 hours. So much for women having no power in the United States.

Apple recently offered a three-month trial for its new Apple Music streaming service. However, Apple was not going to pay royalties to to music artist during this free trial which quickly caught the attention of Taylor Swift.

“Apple Music will not be paying writers, producers, or artists for those three months. I find it to be shocking, disappointing, and completely unlike this historically progressive and generous company.

“We don’t ask you for free iPhones. Please don’t ask us to provide you with our music for no compensation," Taylor wrote in an open letter to Apple on Tumblr.

Faced with the reality that Swift might withhold her mega-popular album “1989” from Apple Music, Apple quickly reversed its original plan and agreed to pay artist during the free trial period.

Lets just look at what Swift did a bit deeper. Apple was already paying artists over the going rate for their music, but Apple wasn't going to pay for the free period when it wasn't being paid. Swift doesn't think that is fair, and she may have a point, so Apple caved and is now paying during the trial period.

In other words, Apple is now paying artists much more than other services.

Swift celebrates, but did she REALLY win?  Apple can certainly afford to pay artists more than the going rate for music, in fact they can lose lots of money on the service without blinking. But what about the other music services that actually expect to make money?  They can't compete now so they will be gone before long.

Now we have less competition. Other services have to charge more to stay in business.

If streaming music was an unsustainable model before this, Swift just made sure to put a knife through its heart. The model needs to be sustainable.

Now, Taylor made a legitimate stance for the greater good of all artists. It is laughable how little artists get paid for their music even when they are being paid.

The current model is broken and Spotify, Pandora and Apple cannot be blamed exclusively for negotiating favorable deals. Any person in any business is going to do all they can to negotiate the best deal they can regarding supply chain. Blame the record industry for setting themselves up and positioning themselves out of the seat of power. It is what it is because the industry lacked the vision to best serve itself, artists and clients.

No royalties during trial periods is industry standard - all streaming services work this way. Apple was not being greedy by expecting the same terms. In fact, had they entered negotiations by offering to pay during the trial period (ie, going against industry norms) they would probably have been accused by smaller competitors of abusing their power.

The issue here, frankly, is the smaller artists and rights-holders are concerned about the loss of revenue that will come from other sources during the 3-month Apple Music trial period. They expect quite a large number of people to give it a shot, during which time paid downloads and streams from other services will decline. That's a big hit for that 3-month period, especially for new releases that get most of their revenue shortly after release. And that's a perfectly reasonable concern - but it's not a case of greedy Apple trying to stick it to the artists.

The problem here is multi layered. First of all, many small artists have zero leverage when negotiating contracts with labels. That's what determines how much they get paid, not Apple or Pandora. So blame the labels if you must blame someone.

Secondly, the overall pool of money from paid music purchases has been shrinking as album sales have declined. Apple's service will actually increase the royalty rate to an average of 73% of revenues from the current normal 70%.

Again, how the labels distribute that money to their artists is not Apple's fault or problem. Furthermore, Apple is not offering a free "ad-supported" tier, which makes the labels and artists very happy, since it will help get consumers back into the habit of actually paying for music again.

My only point here is that Apple is painted as a greedy corporate bully, when all they were doing was offering the normal terms for all streaming services. One could argue they are in fact doing more to help the industry long term than any other service, by paying higher royalty rates after the trial period is over, and by not offering a free "ad-supported" tier, which typically brings in negligible income and only further accustoms consumers to not pay for music.

Apple has a long history of working with the music industry, and a record of not gauging them for additional profit once iTunes became a juggernaut. An opposite analogy would be Amazon, who after becoming dominant in e-books is now actively trying to destroy the publishing industry.

It's a brutally tough business that become even tougher now that revenue from recorded music has fallen off. Touring has always been necessary to build record sales, but nowadays, as you say, recorded music doesn't bring much income. A lot of groups don't bother with recording contracts anymore. They sell what they can from their website, and that's it. The financial condition of some of these legendary entertainers is more precarious than their musical legacy would indicate.

A lot of these groups still play their hearts out. If anything, they're even better than they were in their primes back in the 60's and 70's. Being a touring musician has got to be one of the toughest ways to earn a living, but maybe the thunderous standing ovations from the audiences make it worthwhile.

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