Updated at 9:02 AM pacific to clarify royalty rates for labels and performers versus songwriters
Streaming music service Spotify apparently dwarfs Apple acquisition target Beats Music by around 5.9 million paying subscribers.
Beats Music, the streaming music subsidiary of Dr. Dre’s headphones company Beats, had around 111,000 subscribers by the end of March, according to a leaked royalty report. Beats Music stands in stark contrast to streaming music giant Spotify, which has over 24 million listeners and over 6 million paying subscribers, according to its official user figures.
Of course, Beats Music launched in January, while Spotify launched in October 2008. One of the likely reasons Apple intends to acquire Beats for $3.2 billion is Beats’ ability to generate a sizable subscriber base quickly.
Although Beats Music doesn’t have a free, ad-supported tier, it’s difficult to tell how many people actually listen to and pay for tunes on its streaming music service. Since Beats Music’s January launch, it has racked up 49,371 individual accounts ($10 per month) and 61,621 “family” accounts ($15 per month), which accommodate up to five people, according to the leaked document.
But telecommunications giant AT&T has been doling out three months of Beats Music for free as part of a promotion, so a good portion of those “subscribers” have likely paid nothing for the service so far.
The royalty document also contains some disenchanting figures for songwriters, showing the paltry amount Beats Music pays them per song played: $0.000126 per play.
“Traditionally performers and songwriters have been paid about equally,” David Lowery, the musician who posted the leaked document to the Trichordist blog, explained in an email to VentureBeat. “But with the advent of streaming and webcasting [accounting], the division flipped about 10-to-1 in favor of the performer.
“Generally divide the label rate by 10 and you end up with the songwriter rate.”
So when Spotify pays royalties between $0.006 and $0.0084 per song played on the service, songwriters only get a tiny slice of already meager sum.
The Beats Music royalty rate means your favorite songwriter could pay for one month of a Beats individual subscription ($10) after 80,000 plays of her hit single — an alarming calculation. So assuming the document is genuine — and Lowery assures us it is — Apple may face pressure to raise Beat Music’s artist compensation.
Either way, there are plenty of reasons why it makes sense for Apple to snap up Beats.