With the launch of Apple Music exactly two weeks away (set to launch on June 30), indie music publishers say that they have had no contact from the company seeking licenses, leading many in the music publishing community to suspect that the Cupertino, Ca. giant will send a bulk email to publishers with an opt-in contract attached.
According to music industry executives in-the-know, Apple will offer publishers a headline rate of 13.5 percent of revenue (first reported by Re/code), which is higher than the 12 percent it pays publishers for its locker interactive streaming service, as well as the 10 percent it pays publishers for its iTunes Radio service. Industry sources tell Billboard that Apple is offering this higher rate to sell indie publishers on its plan to hold off royalty payments until after its the three-month trial period to consumers. The controversial trial period is already causing considerable turmoil among indie labels; it will be interesting to see how indie publishers react.
That free trial, with no payments being made to rights holders, precluded Apple from taking advantage of the statutory licenses that most interactive streaming services use. Under that statutory license, Apple must send notices of intent (NOIs) to publishers with a list of the songs they plan to use, and then make payment to publishers using a three-tier formula approved by the Copyright Royalty Board.
That combined rate of 71.5 percent to content owners marks a new ceiling in the conventional streaming business model, whereby content owners and services usually split up the revenue 70/30, after advertising deductions. That split, however, typically only represents one level in a layer cake of two, three or four-tier payment structures used in digital deals. The other tiers represent other formulas, usually designed around a per-subscriber rate; or a time usage rate. Likewise, publishing payment formulas also usually come with three- or four-tiered formulas, and whichever produced the biggest revenue pool is the one that is used.
So while 13.5 percent of revenue is a headline rate, it is likely only one component of one tier of the payment formula that will be used to determine royalties.