The free trial is limited to three months, so it's simply false to equate it with 'free' or 'freemium'.
Apple is asking labels to offer users access to their music for free during the trial period. I.e. Apple isn't going to subsidize the music during the trials.
The real question is - why is beggar's banquet afraid of giving their listeners a 3 month free trial? Are they afraid that people won't want to continue listening to their artists after that?
I would surmise that they have data based on plays from other streaming services that suggests that plays for new releases spike around when that release happens. Unless a hit is generated, plays might level off.
I'm in no way a music industry expert, but I can see a couple of scenarios where this is bad:
- an emerging band/small label might need those 3 months of revenue to actually survive, especially if it's their first/only release
- people will probably listen after the 3 months, but I can imagine most albums are listened to during the launch window and not much after, so they're be losing most of their money...
> The real question is - why is beggar's banquet afraid of giving their listeners a 3 month free trial?
Why do you consider it reasonable for Apple to use artists' IP, free, in order to acquire users for Apple's paid services?
EDIT: I also suspect that the free trial will create an enormous cash flow crunch for smaller labels when Apple Music releases. Consider the following: Apple Music will become available, for free, to all existing iTunes users for 3 months. You can expect that iTunes music purchases will nosedive after Apple Music's release, at least for those first months.
If you're a small indie label, it's likely that losing the lion's share of a full quarter of revenue from one of the largest music stores on earth (never mind the ripple effects on other stores) is going to represent a significant financial hardship. Hence their consternation over mandatory 3 month free streaming.
> Why do you consider it reasonable for Apple to use artists' IP, free, in order to acquire users for Apple's paid services?
I don't and that's a false statement about what's happening. When the free trial ends, payments from the users are split with the artists. Both the artists and Apple benefit from the success of the service.
You could equally well say - "why should artists expect to user Apple's IP to market their music for free?"
The problem is new releases. If I release an album at the start of the trial people will naturally listen to it a lot for a couple of months and then listen to other stuff - and now I've just lost out on revenue for the biggest selling period for that album (around the release). For the small labels this is enough to put them out of business.
> You could equally well say - "why should artists expect to user Apple's IP to market their music for free?"
Except that they don't. Apple takes a cut of each payment just like it does on the App Store.
"Artists using Apple's IP for free" is not what's going on here - Apple is stating it will not pay artists in an effort to subsidize its user acquisition efforts. If Apple were forgoing its portion of each subscription payment, while still paying artists their portion, no one would be complaining.
Let's put it this way: tomorrow, Apple announces that it will be introducing an "App Store Subscription." For $9.99/month users will receive unlimited access to all apps on the App Store. Developers will receive a share of each user's subscription payments in proportion to app usage. Apple simultaneously announces a 3 month free trial for all App Store accounts, and states that it will be making no payments to developers during that trial since users are not paying for it.
I think this statement might be among the most profound crystallizations of a certain type of SV mindset that people outside that world find flabbergasting. Marketplaces do not exist without goods to sell. If you were to walk into a record store and mistake the store itself, and not the music, for being the main reason why people visit record stores, and that all of these recording artists are super lucky to be in this awesome store, well... I'd like to meet the person who thinks that, I guess. Maybe.
Rhetorical questions cut both ways: Why is Apple afraid of subsidizing the free trial designed to acquire customers for their streaming service? Are they afraid that people won't want to continue paying for their service after that?
This. I think Apple is convinced that 3 months is enough time to get customers in the HABIT of using their service such that they'll look at the new $10 charge on their iTunes bill, shrug their shoulders, and go back to listening to music. The whole "no royalties" thing is just Apple playing hardball to try to minimize the cost of the free trial.
Personally, I think they should subsidize some of the smaller/indie labels that can't afford the 3-month drop, but that's plan F or even M for Apple.
I want to know why Apple is afraid of giving me free cell phone service with an unlimited data plan for my iPhone for three months when I buy one at the Apple store. Are they afraid I won't continue to want such a plan after the three months are up?
Does this exclude them from Beats 1 as well? I haven't listened to Ebro or Julie but I know there will definitely be music coming out via Beggars (XL & Young Turks) that Zane Lowe will want to feature - I could see it really pissing a DJ off if they can't play music like this just because their employer can't get the licensing right.
Good point but I think that hurts Apple more than the artists. There are plenty of more popular alternatives available - but Apple will fail if it's missing too much content.
>we struggle to see why rights owners and artists should bear this aspect of Apple’s customer acquisition costs
This. If Apple wants to draw people to their music service with a free 3 month trial, they should be ponying up the cash for those 3 months, or at least part of it since this is ultimately a mutually beneficial arrangement. Expecting labels to pay for the richest corporation on earth to attract people to its new music service seems wrong.
The artists releasing things in this quarter are going to be the worst affected. I know that I won't be purchasing any new music in the next 3 months.
Apple is going up against well-entrenched incumbents. It would be a good idea for it to use those cash reserves in order to carve out a space in streaming-land, if that's something it wants to get into. See also: Microsoft and the XBox - how many years was it before that broke even?
Throwing money at labels alienated from Spotify and co may or may not be a good use of that money, but given the amount of griping going around, it could be worth a shot. That's between the respective beancounters of Apple and the labels.
MobileMe was supposed to have a 2 month free trial that became a 3 month free trial due to the glitches during launch (and some people even got 4 months due to a payment screwup where they were billed for the full year in advance rather than a token authorization)
> ...or at least part of it since this is ultimately a mutually beneficial arrangement.
I agree with most of your comment but wanted to flag this...
I don't think it's that mutually beneficial. Apple gets the reward of stealing valuable market share from Spotify, Rdio, etc. The labels just receive a different flavor of what they already have: Access to a streaming service that people subscribe to.
Apple is supposedly paying ~1.5 points more than Spotify, so labels would presumably get _some_ benefit from consumers moving to Apple Music. If the consumers they convert come from any other service's free tier — which is admittedly unlikely to be a huge amount — the effect would be even more pronounced.
Can anyone explain the intent here? It seems like a ridiculous decision by Apple any way I look at it... and I'm an active opponent of the major labels & right-holder organizations.
If Apple is trying to shift to a user-subscription model and pay the labels (ultimately, artists) net-90, that's great, however it's obvious to anyone who's run a bootstrapped business that an unforeseen, 90 day break in cash flow can be an unrecoverable setback.
Not for big labels. They can weather the storm (though precedent dictates they'll pass as much of this cost on to their artists as legally possible).
The financial situation of end content creators and smaller studios is far more variable. Some will be fine. Others (especially those with content scheduled for release within this 3-month window) could be completely overwhelmed. This simply consolidates more market power into the hands of currently-large labels, and generates ill will toward Apple elsewhere.
Why would a company that seems to want to attract self-publishers into its walled garden not find a structured solution to bridge the gap?
I'm all for forcing artists to stream their music (I'm looking at you, Taylor Swift), because I see how that can ultimately make everyone more money.
Arbitrarily disrupting cash flow, though, in order to run an experiment and offload your acquisition costs is a pretty offensive, and surprising move by a company with hundreds of billions in fungible assets.
There's a 30/70 split for most online music services (both streaming and purchase). The major labels negotiate to get a better deal, but for most artists there's a distribution fee of 30%. I don't have the details for the Apple Music agreement, but I know both Spotify and Tidal takes a 30 % cut of the revenue. I expect Apple Music to follow the same revenue split as iTunes.
Also: Spotify's freemium model pays out about 1/20 compared to Tidal premium-only model. If Apple Music is a consumer success, it (and other premium-only services) will be a much more attractive option for artists than Spotify.
> And given the natural response of competing digital services to offer comparable terms, we fear that the free trial aspect, far from moving the industry away from freemium services – a model we support – is only resulting in taking the “mium” out of freemium.
Wait, how does that work exactly?
(Though I agree with the point that they shouldn't have to bear Apple's customer acquisition costs.)
What's happening here is not a shift to net 90, and it's also not an attempt by Apple to rip any rightsholders off.
Instead, it appears Apple and the major labels believe that three free months of Apple Music threatens to hurt Spotify's userbase growth at a crucial time for Spotify (fundraising pre-IPO). The industry has lost its faith in freemium (Apple Music, trial aside, has no free tier) and either this will kill Spotify or get them in line.
The indies, who overall can't afford losing three months of revenue, are just caught in the cross fire.
The indies, who overall can't afford losing three months of revenue, are just caught in the cross fire.
People keep saying this. Is there much evidence to support it? It's very understandable that they don't want to forgo revenue, but that is not the same as being unable to continue operating with the lower revenue.
How about you forgo getting paid for your work for three months to help your employer out? Will you die as a result, probably not, so we're all good right?
I did say I understood why they do not want to do it, I'm still curious what the actual impact on their revenues would be (or can we not talk about that because the situation involves a bigger company that has lots of money?).
I think you're mistaken if you think that the majors would voluntarily relinquish three months of royalties from trials of Apple Music just to hurt Spotify, when they could simply pull their content from Spotify a la Taylor Swift to hurt it much more. This is Apple trying to push costs wherever they can and ignoring the indies during negotiation. It wouldn't be the first time that indies get the raw deal from a large corporate making decisions with the majors in mind.
This letter and other bleating from labels is just about trying to get a better negotiating position. What this letter doesn't mention is that Apple is offering a higher cut on an ongoing basis in exchange for the 3 month free trial.
>Apple won’t pay music owners anything for the songs that are streamed during Apple Music’s three-month trial period, a bone of contention with music labels during negotiations for the new service. But Kondrk says Apple’s payouts are a few percentage points higher than the industry standard, in part to account for the lengthy trial period; most paid subscription services offer a free one-month trial.
The number I read was 1.5% more. Let's see some math:
Artist earns $100 in royalties per month from service. In three months, has earned $300.
Artist earns $100 * 1.015 in royalties from Apple Music. In three months has earned $304.50.
Artist loses $300 in royalties from 3 month trial. At new rate, it will take (300/1.5 = 200) months to recoup the difference from the new royalty scheme to get back the loss. Sounds like a fantastic deal for artists...
Hmm. Apple prominently features FKA Twigs in Apple Music promotional material (and in the keynote), but she is under Young Turks which is part of Beggars. Wonder how that will play out..
If there are enough artists that opt out because of the 3 month free trial, then the 3 month trial will actually work against Apple here. You'd get a lot of people trying the service out during the free trial and being frustrated at the amount of music that's missing from the service.
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[ 3.5 ms ] story [ 99.1 ms ] threadhttps://en.wikipedia.org/wiki/Beggars_Group#Current_group_ar...
Apple is asking labels to offer users access to their music for free during the trial period. I.e. Apple isn't going to subsidize the music during the trials.
The real question is - why is beggar's banquet afraid of giving their listeners a 3 month free trial? Are they afraid that people won't want to continue listening to their artists after that?
- an emerging band/small label might need those 3 months of revenue to actually survive, especially if it's their first/only release
- people will probably listen after the 3 months, but I can imagine most albums are listened to during the launch window and not much after, so they're be losing most of their money...
Why do you consider it reasonable for Apple to use artists' IP, free, in order to acquire users for Apple's paid services?
EDIT: I also suspect that the free trial will create an enormous cash flow crunch for smaller labels when Apple Music releases. Consider the following: Apple Music will become available, for free, to all existing iTunes users for 3 months. You can expect that iTunes music purchases will nosedive after Apple Music's release, at least for those first months.
If you're a small indie label, it's likely that losing the lion's share of a full quarter of revenue from one of the largest music stores on earth (never mind the ripple effects on other stores) is going to represent a significant financial hardship. Hence their consternation over mandatory 3 month free streaming.
I don't and that's a false statement about what's happening. When the free trial ends, payments from the users are split with the artists. Both the artists and Apple benefit from the success of the service.
You could equally well say - "why should artists expect to user Apple's IP to market their music for free?"
Except that they don't. Apple takes a cut of each payment just like it does on the App Store.
"Artists using Apple's IP for free" is not what's going on here - Apple is stating it will not pay artists in an effort to subsidize its user acquisition efforts. If Apple were forgoing its portion of each subscription payment, while still paying artists their portion, no one would be complaining.
Let's put it this way: tomorrow, Apple announces that it will be introducing an "App Store Subscription." For $9.99/month users will receive unlimited access to all apps on the App Store. Developers will receive a share of each user's subscription payments in proportion to app usage. Apple simultaneously announces a 3 month free trial for all App Store accounts, and states that it will be making no payments to developers during that trial since users are not paying for it.
Do you feel that this is a fair arrangement?
Personally, I think they should subsidize some of the smaller/indie labels that can't afford the 3-month drop, but that's plan F or even M for Apple.
This. If Apple wants to draw people to their music service with a free 3 month trial, they should be ponying up the cash for those 3 months, or at least part of it since this is ultimately a mutually beneficial arrangement. Expecting labels to pay for the richest corporation on earth to attract people to its new music service seems wrong.
The artists releasing things in this quarter are going to be the worst affected. I know that I won't be purchasing any new music in the next 3 months.
Throwing money at labels alienated from Spotify and co may or may not be a good use of that money, but given the amount of griping going around, it could be worth a shot. That's between the respective beancounters of Apple and the labels.
I agree with most of your comment but wanted to flag this...
I don't think it's that mutually beneficial. Apple gets the reward of stealing valuable market share from Spotify, Rdio, etc. The labels just receive a different flavor of what they already have: Access to a streaming service that people subscribe to.
If Apple is trying to shift to a user-subscription model and pay the labels (ultimately, artists) net-90, that's great, however it's obvious to anyone who's run a bootstrapped business that an unforeseen, 90 day break in cash flow can be an unrecoverable setback.
Not for big labels. They can weather the storm (though precedent dictates they'll pass as much of this cost on to their artists as legally possible).
The financial situation of end content creators and smaller studios is far more variable. Some will be fine. Others (especially those with content scheduled for release within this 3-month window) could be completely overwhelmed. This simply consolidates more market power into the hands of currently-large labels, and generates ill will toward Apple elsewhere.
Why would a company that seems to want to attract self-publishers into its walled garden not find a structured solution to bridge the gap?
I'm all for forcing artists to stream their music (I'm looking at you, Taylor Swift), because I see how that can ultimately make everyone more money.
Arbitrarily disrupting cash flow, though, in order to run an experiment and offload your acquisition costs is a pretty offensive, and surprising move by a company with hundreds of billions in fungible assets.
Also: Spotify's freemium model pays out about 1/20 compared to Tidal premium-only model. If Apple Music is a consumer success, it (and other premium-only services) will be a much more attractive option for artists than Spotify.
Wait, how does that work exactly?
(Though I agree with the point that they shouldn't have to bear Apple's customer acquisition costs.)
It's not like their fate is entirely in Apple's hands.
Instead, it appears Apple and the major labels believe that three free months of Apple Music threatens to hurt Spotify's userbase growth at a crucial time for Spotify (fundraising pre-IPO). The industry has lost its faith in freemium (Apple Music, trial aside, has no free tier) and either this will kill Spotify or get them in line.
The indies, who overall can't afford losing three months of revenue, are just caught in the cross fire.
People keep saying this. Is there much evidence to support it? It's very understandable that they don't want to forgo revenue, but that is not the same as being unable to continue operating with the lower revenue.
I did say I understood why they do not want to do it, I'm still curious what the actual impact on their revenues would be (or can we not talk about that because the situation involves a bigger company that has lots of money?).
Oh, good. It'll only take 66 months to recoup that after a three month trial.
>Apple won’t pay music owners anything for the songs that are streamed during Apple Music’s three-month trial period, a bone of contention with music labels during negotiations for the new service. But Kondrk says Apple’s payouts are a few percentage points higher than the industry standard, in part to account for the lengthy trial period; most paid subscription services offer a free one-month trial.
http://recode.net/2015/06/15/heres-what-happens-to-your-10-a...
Artist earns $100 in royalties per month from service. In three months, has earned $300.
Artist earns $100 * 1.015 in royalties from Apple Music. In three months has earned $304.50.
Artist loses $300 in royalties from 3 month trial. At new rate, it will take (300/1.5 = 200) months to recoup the difference from the new royalty scheme to get back the loss. Sounds like a fantastic deal for artists...