Apple Music Won't Pay Musicians During Free User Trials

Apple Music reportedly will pay musicians about 71 percent of the monthly membership fees it collects, but not until free trials finish.

Apple Music, Spotify, Pandora, streaming music, musicians, royalties

Apple Music will offer free 90-day music streaming trials to customers when the service begins on June 30, but while the free service is being provided, Apple won't be paying any royalties to the musicians whose work it is delivering.

The lack of payments during the trial periods for customers means that the musicians and the people who own the rights and licenses for the music will be providing it for free, according to reports from The Consumerist and other sources. The royalty rate that will eventually be paid by Apple amounts to about 71.5 percent of the $9.99 monthly subscription fees Apple Music will earn for individual users in the United States, the story reported. The royalty rate varies in other countries to up to about 73 percent of the subscription prices.

The details about the royalty rates to be paid to music labels and musicians were revealed in an interview with an Apple executive, the report continued.

Apple announced its upcoming Apple Music streaming music service on June 8 at its Worldwide Developers Conference in San Francisco. It will launch June 30 in 100 countries, including the United States, and will join the iTunes store to give music lovers a new way to find a huge catalog of music in one destination. The service will be compatible with iOS 8.4 on the iPhone, iPad and iPod Touch and as an update to iTunes on Mac computers to start; Windows and Android versions will be available in the fall.

While individual memberships will be priced at $9.99 per month, a family membership for up to six family members is being priced at $14.99 per month.

For months, reports said that Apple would be launching a new music streaming service as an update of the Beats Music service it acquired in May 2014 when it bought Beats Electronics, which also included Beats' headphone business. That purchase was made with $2.6 billion in cash and $400 million in Apple stock. Beats Electronics, founded by rapper Dr. Dre and pop music producer Jimmy Iovine, makes high-end headphones and also operates Beats Music, the popular streaming radio service. Beats had launched Beats Music, a $9.99-a-month streaming music service for iOS, Android and Windows Phone devices, in January 2014, according to a previous eWEEK report.

Meanwhile, earlier in June the state attorneys general in New York and Connecticut announced that they had begun to look into how Apple has been working with recording companies to make deals for its upcoming music streaming service, just a month after federal officials began asking similar questions. The latest inquiries follow a similar move in May when U.S. officials from the Federal Trade Commission began looking at whether Apple was using its market power and influence from its hugely successful iTunes store to try to shut out or harm competitors like Spotify and Pandora, according to an earlier eWEEK report. The earlier FTC antitrust inquiry is reportedly in its early stages and has included discussions about Apple's practices with executives from several record companies.

Government officials have been eyeing whether Apple has been engaged in inappropriate methods or negotiations in setting up music content deals with record companies, according to the probes.

With Apple Music, Apple is diving into a whole new business market in streaming music that already has established vendors including Spotify, Pandora and others.

Also earlier in June, major music streaming competitor Spotify revealed that it is receiving $526 million in new funding, including a $115 million investment from Nordic telecom operator TeliaSonera AB, according to reports. The additional money will used to help fortify Spotify as it prepares for the new competition from Apple, which has a large user base and an established iTunes business that has been selling music by the song or album since 2003. Spotify's premium music streaming accounts cost $9.99 per month for the first user, with a 50 percent discount for each additional family member who wants to use the service.