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Apple’s Beats buy might not be good news for musicians

Published May 29th, 2014 6:15PM EDT
Apple Beats Music Royalties

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Apple on Wednesday confirmed it plans to purchase Beats for $3 billion, just as rumored in previous weeks. But the deal isn’t necessarily good news for all music creators, Bloomberg reports, especially for smaller artists who fear that Apple’s music streaming service will negatively impact their earnings.

Cellist Zoe Keating told the publication that Apple iTunes sales netted her $38,196 last year, while sales from three other download services accounted for about $34,000. Meanwhile, streaming from five different services, including Spotify and Pandora, only brought in $6,381.

“iTunes downloads help me pay my monthly mortgage,” the artist said. “Unless you’re a mega-star, you can’t count on the same for streaming services. Me and a lot of my music artist friends are worried about the switch from music buyers to music listeners.”

‘‘Something we’ve been waiting for and something we’ve been dreading is the day when Apple gets into streaming,” she added. “If they can get the fact across they care about the artist, want to get their story told and still make purchasing of tracks possible, that’s all anybody’d want.”

Meanwhile, Apple’s Eddy Cue said that Beats will make Apple’s lineup even better, “from free streaming with iTunes Radio to a world-class subscription service in Beats, and of course buying music from the iTunes Store as customers have loved to do for years.”

This isn’t the first time musicians have complained about the royalty rates paid by music streaming businesses, which are higher than conventional radio on a per-listen basis.

Indie rock band Cracker’s David Lowery last June revealed that he received $16.89 for a song that was played 1.16 million times on Pandora. Spotify, which played the song 116,260 times, paid him $12.05. During the same time, Sirius XM paid him $181, while terrestrial radio paid him $1,522, according to documents posted on his website.

Meanwhile, Pandora disputed Lowery’s claims saying that it paid a total of $1,370 for the song, of which $585 went to the band after fees, of which $234 reached Lowery, including songwriting and performing fees. Pandora also said that terrestrial radio only paid him songwriting fees, but not royalty rates for also performing the song.

Pandora told Bloomberg it paid more than $340 million in royalties to rights holders last year, while Spotify paid $500 million during the same period.

However, music streaming won’t generate enough revenue to compensate for the declining music purchases in the near future.

“The question everyone in the industry is asking is whether spending on streaming will grow to compensate for declines in physical spending, which will never rebound, and downloads, which are flatlining,” Strategy Analytics analyst Leika Kawasaki said.

The firm expects worldwide music revenue to decline in the next few years from an estimated $19.6 billion. Mobile and online streaming services will become the second-largest revenue source behind physical album purchases according to Strategy Analaytics.

Chris Smith Senior Writer

Chris Smith has been covering consumer electronics ever since the iPhone revolutionized the industry in 2008. When he’s not writing about the most recent tech news for BGR, he brings his entertainment expertise to Marvel’s Cinematic Universe and other blockbuster franchises.

Outside of work, you’ll catch him streaming almost every new movie and TV show release as soon as it's available.


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