Taylor Swift's letter to Apple urging the company to pay artists during the trial period of the new service is now famous for its harsh criticism and the quick policy change it prompted from Apple. Ever since Taylor Swift pulled her music catalog from Spotify in 2014, artists have questioned whether any of the top music streaming services are in their best interests.
But streaming services may not be the source of artists' problems, says Allen Bargfrede, a professor of music business at Berklee College of Music in Boston. Artists are happy with the digital downloads model, which iTunes helped shape, and the differences between the downloads and streaming business models are small.
"The streaming services are paying out the same amount that iTunes was paying for a download sale, which was 70%," Bargfrede said in a phone interview. "Then, the labels are paying back to the artists at the same percent [as they were with iTunes.]"
Since Apple introduced iTunes in 2000 and the iPod in 2001, the music industry has been trying to determine how it best fits into the digital marketplace.
Apple, of course, reshaped the industry when its iTunes store became the leading source for music downloads. It also re-shaped the economics of the industry by establishing a 30% charge for operating the platform, leaving the remaining 70% for music labels.
With the introduction of Apple Music, the rate at which the music labels are paid has increased to 71.5%, and yet, artists have spoken out against Apple Music, and labels have urged their artists not to sign deals with the music streaming company. Apple has since remedied most of its content provider's qualms, but the artists are still not entirely happy.
The way artists get paid is complicated, Paul Verna, senior analyst at eMarketer said. Money doesn't go directly from the music streaming services to the artists. It gets paid to the music labels, which takes a large cut before paying the artists a "paltry" sum. According to Bargfrede, artists get paid only 12-20% of the income music labels receive from the streaming services.
For example, if a user pays a music streaming service $10 to be able to stream music, the average service will take $3, passing $7 on to the music labels. If an artist signed a contract with the music label for 20%, only $1.40 of the initial $10 will be paid to the artist by the label, a small sum compared to the initial $10.
Record labels charge a large percentage primarily because of the marketing they provide for their artists, Bargfrede said. Anyone can self-produce their own music and get it on Spotify, but they need the labels to really be heard.