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Comment by tfigueroa | Hacker News Reader

The Pandora guy, Tom Conrad, retired from Pandora; though I'd guess he still holds shares, I wouldn't say he's "trying to make money too". He's ex-Apple, pro-Apple, and was CTO of a tenacious music streaming company - all very relevant experience to comment on this.

His point, which I share, is not to chastise Apple "for not being altruistic" - it was that Apple tried to play the game with very different rules than most companies do. It's worth calling them out about it, especially because they are the Goliath.

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Thanks for the correction on his status w.r.t. Pandora. I'll give him the benefit of the doubt and suggest he's disinterested then. But, calling them out for having straightforward royalties?

BTW the direct quote is:

"Nothing here to suggest Apple treats artists more fairly than anyone else."

Apple was going to pay as well or better than everyone else (actually a touch more, but no big deal) before agreeing to pay royalties when it isn't collecting revenues.

And again, Apple has no free tier -- Pandora's free tier (95% of users) generates very little ad revenue and that's presumably where artists get their 46.5%. Spotify has over 25% paid users (and is losing money paying out 70% of revenues).

Here's a quote from a somewhat misleading blog post ranting about Pandora's royalties:

"Here’s an idea. Why doesn’t Pandora get off the couch and get an actual business model instead of asking for a handout from congress and artists?"

Apple created a sustainable model for musicians in the age of Napster/Limewire. Now it's trying to do something similar in the age of Spotify/Pandora, and it's doing it with a (potentially) sustainable business model that pays at least as well as anyone else. But until now it wasn't just giving money away.

Let's put it another way: Pandora, Spotify, et al are trying to build businesses by giving away stuff that isn't free, and have the temerity to complain when a company that has an actual business model (buy stuff for X and sell it for more than X) tries to compete with them.

Typically royalties aren't tied to revenue; they're tied to plays. Play a song, pay out. That's how the system tends to work.

Apple wasn't planning on doing that much, and now they are. So I think "nothing here to suggest Apple treats artists more fairly than anyone else" is an apt observation. Unless the details come to light, it's unclear if they're doing better or worse for artists than anyone.

> Spotify has over 25% paid users (and is losing money paying out 70% of revenues).

Isn't that the big thing here? Apple is coming into a market where the established players are losing money and throwing around all their surplus cash from their hardware business to establish their own music service. Is this good for the artists in the short run? Maybe. Is it good for artists in the long run, if Apple manages to put all the other streaming services out of business? I'm not sure it is.

@cwyers has Apple ever used its main business to support loss-making entries into other markets? Microsoft has done stuff like give away major products (e.g. Access, Internet Explorer) to kill competitors. If you have evidence Apple is doing this I'd love to see it.

Kind of related: Apple early on donated to schools, so graduates would want Macs at their first job.

Good point. It also got a hefty tax writeoff.

That said, everyone does this to some extent. It's a bit different from intentionally obliterating competitors with dumped products cross-funded from profitable businesses.

Reminds me of Dell, using servers to drive down desktop margins. Then when everybody got into servers, they went into printers. Anything to get an advantage and squeeze the commodity item.

@tfigueroa

Pandora pays per play and effectively pays out 46.5% of revenues. Spotify pays out 70% of revenues and loses money. Apple is promising to pay ~71.5% of revenues. Just on that basis, Apple is paying more. (Spotify's 70% isn't worth much if it's not sustainable.)

Now, how Apple will pay for plays in the free trial period is probably by treating free trial users as though they are paying users for purposes of paying artists. I.e. they're paying for promotional tickets (which the labels do not do AFAIK -- that would be a marketing expense that comes out of your royalties). So they're still (probably?) not paying per play.

The point is, Apple was going to be 100% paid (aside from free trials), so that's a hugely better deal, and now the free trials are being paid out to musicians, which is the equivalent of a distributor eating marketing costs, something record labels, movie studios, and games companies never do.

That's apples to oranges. Pandora and Spotify pay artists per spin; the more you play, the more you're paid. Apple paying a percentage of revenues is an entirely different method, and it doesn't explain how that money is distributed. So, it isn't clear that Apple's ways are any better (or worse) than what's already happening. More information about the theory and reality of the payments is needed.

I get your point about Apple Music being otherwise 100% paid and now eating the cost of a free trial, but the alternative was _artists_ eating the (opportunity) cost. That's not very nice, especially given that Apple can afford it.

Besides, holding up Apple against the behavior or record labels, movie studios, and game companies - that's a pretty low bar, honestly.

> Besides, holding up Apple against the behavior or record labels, movie studios, and game companies - that's a pretty low bar, honestly.

Totally true, no question. My point is being that all the other actors are worse.

BTW Spotify and Pandora "pay per spin" but Pandora's payment turns out to be pretty low, and Spotify's is calculated to add up to a fixed portion, so how it is really paying per spin? It's the radio stations that actually pay per spin, but they don't pay per listener, so that's also a joke.

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