Good news for Apple: Free music services must pay higher royalties

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Tired of Apple Music's playlists? Try something even more indie.
Free services must pay higher royalties.
Photo: Jim Merithew/Cult of Mac

In news which could well be good for Apple Music, but bad for rival free streaming music services, the federal Copyright Royalty Board has ruled that ad-supported internet radio companies such as Pandora must pay higher royalty rates to artists and record labels.

Starting next year, Pandora, iHeartMedia and others will pay 17 cents for every 100 plays of a song on their free tiers. This fee will increase over the following four years in line with inflation.

Currently, Pandora pays whichever is greater out of 25 percent of revenue or 14 cents per 100 plays on its free tier. Somewhat confusingly, the new report suggests that royalty rates per 100 plays on Pandora’s $5 per month premium service will be set at 22 cents, although this would be down from the 25 cents it claims it currently pays.

Either way, the net result is that things are being made tougher for streaming music services operating on free tiers, which Apple Music notably does not do. This comes after Pandora CEO Brian McAndres dismissed Apple Music back in July as nothing to worry about.

While I can’t imagine that Apple wants to pay more royalties than it has to, it’s also in the great position of not having to rely on its music service to make the majority of its revenue, as is the case for rival music and internet radio services.

Even if Apple Music never became a profitable business for Apple on its own, the fact that it can drive customers to buy iPhones, iPads and other devices — combined with the company’s enormous cash reserves — gives it an obvious edge in the marketplace. According to Apple, its Apple Music service currently has around 6.5 million paying subscribers.

While artists will no doubt complain that the increase in royalties is still not what it should be, yesterday’s announcement is still a positive step toward artists being properly remunerated.

Via: Wall Street Journal