Apple's Music payment rate for artists and labels is fundamentally a penny per stream. This is according to a letter from the company that was posted on its artist dashboard.

That payment rate is higher than Spotify, which has a confusing variable rate scheme that basically tops out of a half-penny per stream.

Apple Music's payment scheme

According to The Wall Street Journal, Apple Music announcing a penny-per-stream rate is a great PR move for the company, since it is very simple to understand and it puts the spotlight back to Spotify, Apple Music's biggest rival, that does not talk much about its per-stream payments.

Artists, managers, and lawyers are reeling from the loss of touring revenue during the pandemic.

With that, there have been calls for higher payouts from music streaming, which has grown rapidly in the past year. Many fans have joined the call to raise the compensation for artists on platforms like Apple Music and Spotify.

Also Read: Spotify vs. Apple Music vs. YouTube Music: Which Is the Best Music Streaming Service For You?

Apple wrote in the letter that it pays 52% of its subscription revenue to record labels. Spotify claims that it pays two-thirds of every dollar of revenue to rights holders, with 75% to 80% of that going to labels, according to Varitey.

That breaks down to 50 to 53 cents on the dollar, depending on agreements between the service and different labels.

Meanwhile, Spotify had insisted that pay-per-stream figures are misleading and launched an entire website called Loud & Clear last month that was designed to help artist and fans understand how payments work, and a good part of it is devoted to explaining why per-stream rates are not the right thing to focus on. 

According to Spotify, in the streaming era, fans do not pay per song and service do not pay per stream, so they do not believe a per stream rate is a meaningful number to analyze.

Spotify claimed that it understands that artists find it useful to calculate an effective per stream rate or a revenue-to-streams ratio, thus dividing the total size of the royalty pool on the music app by the total number of music streams.

Both of these numbers are growing very fast every year.

There are a lot of factors that contribute to that ratio looking small, which the company understand can seem problematic, according to Business Insider.

Spotify's payment issue

It is important to note that Spotify runs a massive ad-supported music service with very different economics than the paid Spotify Premium tier, while Apple Music only offers a paid service.

Spotify's platform is way bigger, with 345 million total users, of which 155 million are paying Spotify Premium customers.

As for Apple Music, it is difficult to put numbers on how big the app is currently. The company's last public number is more than 60 million subscribers from June 2019, and more recent estimates have it at 72 million. 

In any event, Spotify's argument is that it pays lower variable rates on far more streams, while Apple's happy to say that it pays a higher and simpler rate on fewer streams.

Neither argument really solves the essential economic problem of streaming, which is that most artists can't make a living on streaming royalties alone, which is why everyone is out there selling NFTs and hoping the concert business comes back in the near future.

Related Article: Spotify Addresses Accusations of Undervaluing Artists by Releasing Figures of 13,000 Artists Earning $50K in Royalties in 2020

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Written by Sieeka Khan

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