Apple has decided to pay musicians right from the launch of its new music streaming service, a move that will cost the company some money because it won't be charging customers during a free trial period that will last three months.
Apple hadn't planned to make any payments until after the free trial period ended, but it changed course upon hearing criticism from singer-songwriter Taylor Swift.
"When I woke up this morning and saw what Taylor had written, it really solidified that we needed to make a change. And so that's why we decide[d] we will now pay artists during the trial period," Apple Senior VP Eddy Cue told The Hollywood Reporter last night. "A lot of artists" expressed the same concern, he said.
"Asked if Apple is eating the cost of the 90-day trial period, Cue said, 'We're certainly paying for it, yes. We're all in,'" the article said.
Swift had spoken out on behalf of new artists who haven't yet struck it big "but will not get paid for a quarter of a year’s worth of plays on his or her songs."
"We don’t ask you for free iPhones. Please don’t ask us to provide you with our music for no compensation," Swift wrote. She had planned to hold her new album, 1989, off Apple Music in protest.
Despite the plan for a three-month period in which artists would not be paid, Apple was able to secure streaming rights from major labels Universal Music Group, Sony Music Entertainment, and Warner Music Group with the promise of slightly higher payouts than services like Spotify once the free trial ended.
It's not clear exactly what Apple will pay artists during the trial period.
"Cue says Apple will pay rights holders for the entire three months of the trial period," Re/code wrote. "It can’t be at the same rate that Apple is paying them after free users become subscribers, since Apple is paying out a percentage of revenues once subscribers start paying. Instead, he says, Apple will pay rights holders on a per-stream basis, which he won’t disclose."
After the three-month free trial, consumers will have to pay $10 (or $15 for families) to use the service. Apple will reportedly pay 71.5 percent of subscription revenue to music rights owners in the US and an average of 73 percent outside the US. Spotify says it pays "nearly 70 percent" of revenue to rights holders.
Despite absorbing the cost of the three-month free trial, "Apple will keep the existing royalty rates it has already hammered out with the three major music labels for subscribers," Re/code reported. Apple Music will launch on June 30.