Over 800 million people have given their credit cards to Apple. Most of these people have never used Spotify or Pandora. If you think Apple Music, coming June 30, is just another entrant into the streaming market, think again. I believe the music industry is about to see an unprecedented, huge infusion of music engagement that will have a major financial impact on the music market in less than a year's time. This will be a huge win for independent artists. Here's why: Artist connection and listener experiences. Both factors promise to bolster a lively, multifaceted musical ecology unlike any that existed under the previous system.
With over $10 billion in sales in 2014, iTunes is one of the largest e-commerce stores on earth.
Artists, as well as Apple Music, will indeed need to defer some revenue during the 90-day per-user trial period, during which labels and artists will not receive royalties, although we presume artists will continue to earn performance royalties, and composition rights holders will continue to earn the statutory rate or some other consideration from Apple. But this is the price of building a service at scale, and no company is better poised to do this than one with a huge existing client base.
The key to Apple Music and its success with and for independent artists will be Apple Connect. If artists engage with the platform, and have a decent user experience in creating and launching content from the platform, consumers will also buy in. When the tools of promotion are compelling, reach a large number of fans, and are easy to use, artists will use them to engage their fan base and build their brand. I believe the user experience will be good and artists will come. But will subscribers follow?
Apple and more importantly artists don’t need all 500 million iPhone users or 800 million iTunes users to buy to make this a huge success. If only 5 percent of iTunes users tune in, subscribe to a trial period and sustain their $10 per month, the results will be industry changing. Apple Music will have attracted 40 million paying subscribers paying $4.8 billion dollars per year. That's double what we estimate iTunes sold in downloads last year. Astounding. It's also double Pandora and Spotify's gross 2014 sales... combined.
Loyalists of the Pandora, Spotify, rdio, Rhapsody, Tidal, et al services will tell you that the user experience on their platform is superior. Amazon.com still sells a bunch of music downloads, as do Indie retail platforms like CD Baby.com and Bandcamp. An overfocus on competition is wrong thinking when considering the opportunities for artists and fans participating at monetizing art worldwide. In a big world, there will be room for many winners. This is the indie ethos. Remember, there are 6 billion humans on planet earth, most outside the largest music market in the world who don't have a credit card on file with iTunes. Apple Music is being launched worldwide, and in places where some of these services haven’t yet launched.
If Apple is thinking about music in a way that focuses on the artist and the fan, not the competition, it can create a larger marketplace encompassing exponentially more buyers of music. If it isn't concentrating on converting Spotify clients or convincing Pandora users that Beats 1 is better, it will succeed.
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So: Why is Apple Music good for the Independent artist? The economics are fair relative to the other services on the market. The trial period is limited to three months, no longer. This eliminates conditioning listeners to perpetually take advantage of creators’ largesse. These are good reasons why this service might succeed. But why it's good for all artists is simply this: it isn't solely reliant on tastemakers. Sure, the DJs of Beats 1 will serve up a fair dose of major content and pop hits. But in this ecosystem, there is a place for both artist promotion and fan curation. That is good for the emerging artist and the long tail of tastes. And it’s good for music.
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