Skip to main content

Streaming Music Trial Puts Apple in a Pickle


On June 30th Apple is set to unveil its streaming music service, Apple Music.  The service will initially be available to Apple users. In terms of what the service is, think Spotify: 30 million songs available on-demand for $10/month. There are some ancillary features, like curated playlists and a 24/7 radio station, but the crux of the service is the availability of all of those songs, albums, and artists at the tip - or tap - of your fingers, fully embedded into iOS.

Unlike Spotify (or a handful of other dedicated competitors), Apple does not rely on the service for its livelihood.  Streaming music is just another alluring addition to its prominent ecosystem.  That said, it is jumping into a market that if all goes well it could actually dominate in short order.

Spotify recently announced that it now has 20 million paid users and 75 million users overall.

Apple has 800 million iTunes accounts, with credit cards on file.

With as hard as Spotify has pushed to become the putative leader in the field, its overall user-base is less than 10% of all of those iTunes accounts.  There is no doubt that many of those iTunes account are not necessarily actively managed accounts purchasing digital media on a regular basis.  But, they are there and on file.

To kick things off in a big way, Apple Music will launch with a three-month free trial.  Imagine if even 25% of iTunes users opt-in to the trial, which will undoubtedly be prominently displayed on iPhones and iPads.  That would be 200 million accounts.  In one fail swoop, it dwarfs the Spotify user-base.

The three-month trial is smart for two reasons:
  1. It marks a very lengthy period to become acclimated to the service, hopefully - for Apple - making it indispensable.  By the time the trial periods nears its end, fall will be here!
  2. For a trial that lasts a quarter of the year, how many people will forget about the auto-renewal?  Just those initial "nudged-in" users could fill up the coffers meaningfully.
Which brings me to the crisis du jour.

Apple will ultimately disburse royalties to the music industry to the tune of 71.5% of money made from the service.  This is better than the industry-standard 70%.  However, it came out - through the very loud Tumblr bullhorn of Taylor Swift - that royalties would not be paid-out during the trial period.  Consternation abounded.  This caused Apple to alter course and announce that they now will pay out royalties during the trial period.  

Taylor, we heard you loud and clear.

I'm not certain where to stand on the issue.  Of course artists need to be paid for their work.  But, Apple may end up being a savior again to the industry, bringing its considerable user-base to bear on a streaming market that has not exactly made money for anybody.  Is it not too much to ask artists to go along for three months?  It's not like Apple is making money yet either.  

Let's say they even pay out half of their ultimate royalty percentage during the trial.  That would be about 36%.  What if a wildly successful trial brings in 500M users.  These users would be paying $10/month when the trial period ends, with $7.15 of that going out to the artists and labels.  With the presumed trial percentage, the cost going out would be about $3.60.  

At 500M users, Apple would pay out $1.8B (as in BILLION) per month.  We know how much Apple makes per quarter, and how much money they have in their bank account, wherever that resides.  But $5.4B out - with nothing coming in - seems extortionate.  

Apple is reportedly looking at 100M paying subscribers.  With that potential on the horizon, Apple would still pay out over $1B over the three-month trial (again, if 36% is the trial royalty percentage). And that is if the ceiling is 100M during the trial.  Based on Spotify's paid/free user breakdown, Apple's trial could see 375M signups.
  
Music industry folks think that not being paid during the trial would especially hurt artists who are releasing albums during the window.  But, once the three months are done, you lose access to those albums unless you start paying.  It would be a time-shifted inconvenience.  If users really love the albums, they will pay to keep the subscription going.  Otherwise, they don't have access anymore.

It is one of those arguments where the winner and loser are not evidently clear.


Related 


Comments

Popular posts from this blog

Fethead vs. Cloudlifter & My Podcast Equipment

The Triton Audio Fethead and Cloudlifter are two preamp devices that come up a lot for podcasters searching for the best sound.

One reason is that many podcasters looking for a high-end microphone at a lower budget opt for the Shure SM7B, like me!  This is a great microphone, but has a very low base output (more on this later).  Another reason is that these preamp devices allow you to not go pedal-to-the-metal with your mixer or digital recorders' onboard preamps, which typically add a lot of noise the more you push to maximum.

I am no audio engineering expert, but in my zeal to launch the best podcast that I possibly can, I have learned a lot about how you create good sound and all the tricks that go into doing it at a somewhat modest price.

At heart, what the Fethead and Cloudlifter each do is add about 20-25 decibels of "clean gain" to your microphone's audio signal, before that signal even touches your mixer or digital recorder.  Again, they each add only pure, c…

Jane Gagliardo, Sherry Blackman, Patrick Reilly, Melany McQueeny

Jane Gagliardo, Sherry Blackman, and Patrick Reilly join Melany and Matt for a longform discussion on their riveting book, "Call to Witness: One woman’s battle with disability, discrimination and a pharmaceutical powerhouse."

Get Call to Witness on Amazon!

Jane Gagliardo was a throwaway employee, fired after working nearly a decade for this leading vaccine maker when her disability surfaced. Fearless and impassioned, her story will leave readers empowered to stand up for themselves, even if it means standing alone. This 2002 landmark case changed the law and challenges the way corporations do business today. This riveting dramatic account sheds fascinating insight into the world of vaccine production, both past and present, that will have every reader searching through their immunization record—this corporation literally runs in the veins of millions of Americans.
A portion of the proceeds from the book go to Multiple Sclerosis research.

Check out this episode!

Also find the…

Anthony Cumia has 40,000 Subscribers

This according to a new feature on Anthony Cumia - formerly of the Opie & Anthony Show - in Streaming Media Magazine and on StreamingMedia.com.  Cumia has a video and audio podcast available to subscribers through his Website, AnthonyCumia.com.

The monthly subscription for the content service is $6.95.  By my own math, this means Cumia is bringing in about $278,000 per month, or roughly $3.3 million per year.

As a subscriber, you are offered discounts for locking in your subscription for six months ($32.95) or a year ($59.95).

That is not a bad living as your own boss.

There is no doubt that the workload is greater starting up his own endeavor and without the backing of a large radio conglomerate.  He apparently made about $3 million per year doing his SiriusXM radio show.

The revenue he is bringing in now must also go towards paying staff, ongoing infrastructure and hosting costs, and any promotional aspects he engages in.  Still, he does not leave his home and appears to be d…