Taylor Swift v. Apple Music: why streaming services don’t work


Taylor Swift says she’s not including her songs in the new Apple Music streaming service, and in doing so, she’s naturally grabbing headlines. Very little of this, however, should come as a surprise. Swift is already keeping her music out of streaming competitors like Spotify, meaning she disapproves of the format more than she disapproves of Apple. In fact, Apple and Swift very happily rack up millions of dollars of sales together annually through the much more popular iTunes Music Store. So is this something Apple needs to worry about? Yes, but not for the reason you might think.

Most streaming music services are built on a subscription model in which fans can either pay for extra features or get the standard package for free. Nearly everyone opts for the latter, so these services all struggle financially, with many of them having to keep borrowing money just to keep the lights on – and that’s even with deals in place which allow them to pay artists next to nothing. Those stories you occasionally see about a song getting a million plays in Pandora and the artist getting a check for thirty-six dollars? Those aren’t an anomaly. That’s simply how the streaming music business model works – which is why it’s a model which has already failed and is simply waiting to be put out of its misery.

There is no reason for Taylor Swift to give her music away for fractions of pennies on the dollar to fans who would otherwise be willing to pay ten bucks a pop for it in the iTunes Store (or get their parents to pay for it), and so she smartly keeps her songs away from subscription services. It’s a slightly different equation for each artist, depending on popularity and genre and audience age and so on. Some artists, whose sales never have taken off or who are in a genre like rock where sales have stalled in general, have little to lose by putting their music into the streaming mix and hoping a few new fans will find them and then perhaps eventually start coming to concerts. But there’s no short term money to be made one way or the other, and a number of musicians rightly wish the streaming model would go away entirely.

Apple has spent a decade wishing it would go away as well. Companies like Spotify have to keep bringing in new investors just to keep the doors open for another quarter so they can continue giving away a product that Apple is trying to sell. Eventually these subscription services will all be bankrupt, and in fact if the major labels stopped handing them such one-sided deals, they’d all be out of business tomorrow. If anything, Apple Music is all about helping to facilitate that death more quickly. It’s not that Apple Music, which requires a ten dollar monthly payment from all customers, will be overwhelmingly popular. It’s that it just might finally convince the labels to give up the ghost and pull the plug on the freebie competitors.

Even if Apple Music fails, and the odds are at will, Apple loses nothing. It means the labels and shareholders will finally stop pressuring it to try such a service, as it can easily point to just how few people were willing to pay for such a service. After all, if even the company that saved a dying music industry with the iTunes Store a decade ago can’t make the streaming model work in a profitable manner, then perhaps the world will finally accept that it can’t be done. And then Apple can go back to focusing solely on its overwhelmingly successful and profitable iTunes Store model.

The one thing Apple has to worry about is alienating artists in the process. The trouble with Taylor Swift’s open letter aimed at Apple Music is that it’s pointedly angry. She seems to be saying “I’d except this kind of nonsensical revenue model from scammers like Spotify, but you too, Apple? I thought we were friends.”

And that’s a concern, because she appears to be missing the larger point. The existing crop of streaming services have unwittingly proven that the ad-supported free subscription doesn’t work on a revenue level for anyone. And the services from companies like Google, in which customers have been asked to pay a monthly free up front, have quickly flopped. So Apple Music is playing the one card which just might have a small chance of working: give people three free months in the hopes that once they get accustomed to using it, a fraction of them will just start allowing it to get billed to their credit card each month and kind of forget they’re paying for it.

Swift’s objection: artists aren’t getting paid for those three free months of Apple Music in the mean time. Of course what she’s missing is that other streaming services like Spotify are based on an unlimited-month free trial, and the artists get paid almost literally nothing forever. At least Apple’s model means that the fraction of consumers who stick around beyond the three months will in fact be paying for music, and at that point the artists may get paid actual money instead of rounding errors.

But again, Taylor Swift and Apple have been happily making millions of dollars of revenue together for years. She’s upset because her trusted business partner is suddenly setting up shop selling discount rate goods in a back alley way, and she doesn’t care if Apple is attempting to make the back-alley model work in a much more legitimate manner than the gang of con artists who usually operate out of such spaces. It doesn’t matter that she’s keeping her songs out of Apple Music, which will probably flop anyway, and isn’t necessarily even intended to be a success. It matters that Apple can’t afford to tick off its most valuable artists by screwing with their livelihoods even a little bit. An entire generation of artists make most of their music sales revenue through the iTunes Store, and Apple Music won’t change that. Can Apple afford to be seen by arists as joining the card sharks and panderers in the dark alleyway of music subscription services, without there being fallout from within? We’re about to find out.

Will Stabley
Will Stabley is the Founder and Senior Editor of Stabley Times.
Will Stabley

2 Comments

  1. Jason Tucker on June 21, 2015 at 7:21 pm

    I think that Apple attempting to legitimize this business model is very much a test of what the potential customers can and will want to spend on a service like this.

    I know that the amount of money they can make on this is better than what pennies spotify gives we million plays to the artist.



  2. Mackay Bell on June 22, 2015 at 2:49 pm

    I think you’re right on about all this. But I would go on to say that the record companies probably really pushed Apple to do this, possibly even refusing to renew deals to keep downloads for sale.

    I’ve always suspected that the Beats deal was Apple’s way of paying off the industry (with three billion dollars) with a promise to get into the streaming business, even though it really didn’t want to. In the process, it injected Jimmy Iovine into the company to act as a middle man for their unreasonable expectations.

    As you say, Apple doesn’t have much to lose here. Either it takes off (unlikely) or if it tanks that’s the end of streaming.