Apple is proposing a radical change to the way artists are paid when their music is streamed online, Billboard reports, and the suggestion could hurt rivals like Spotify and Google.
First, let’s explain how royalties are calculated right now. It’s a tricky process: Every streaming company negotiates its own secret deals with rightsholders. The amount paid out varies per region, and per song. It’s so confusing that streaming service Spotify even has a post on its website that tries to explain it all.
Apple wants to shake up the current system. Billboard saw a proposal by Apple to the US Copyright Royalty Board that wants something much simpler. Instead of a complicated formula with lots of variables, Apple is proposing a system where rightsholders are paid 9.1 cents per hundred plays. That means that 100 streams would be roughly equal to one paid download. It’s a more elegant approach to royalties that could end the confusion over the process. Billboard calls it “simpler and more transparent.”
But Apple’s proposal isn’t just a noble attempt to fix the music industry. It could also hurt rival streaming services like Spotify and also YouTube. The new royalty scheme would mean that any streaming services that offer free streams would have to pay out a much higher amount of royalties, as it would be calculated per play, not as a percentage of revenue. Apple Music doesn’t have a free tier, of course.
The proposal by Apple isn’t likely to happen overnight, though. It’s still early days for the board, and any of its decisions would only come into force at 2018 at the earliest.
NOW WATCH: Tech Insider videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.