Some indie record companies are lining up against Apple Music’s plan to make larger royalty payments for tracks available in Spatial Audio, arguing it will disadvantage them financially – by potentially increasing the cost of mixing tracks in the immersive sound format, or by reducing their royalty payouts, according to a new report.
Last month MBW obtained an update from Apple to its label partners, announcing that it would be implementing a recorded music royalty boost of up to 10% for music that had been mastered for Spatial Audio on its platform.
The detail, however, suggested this payout rise would come from a fixed ‘pro-rata’ royalty pool. So for some partners to obtain a royalty boost, other partners – i.e. those not making their music available in Spatial Audio – would logically see a royalty reduction.
Starting with the January month-end royalty payments, explained Apple, “pro-rata shares for Spatial Available plays will be calculated using a factor of 1.1 while Non-Spatial Available plays will continue to use a factor of 1”.
This change is not only “meant to reward higher quality content, but also to ensure that artists are being compensated for the time and investment they put into mixing in Spatial,” the streaming service added.
However, Apple’s new payout model isn’t making everyone in the music business happy.
According to a report from the Financial Times, some indie record companies – including Beggars Group, Secretly, and Partisan Records – are “pushing back” against the plan, arguing it will take money out of their pockets while benefitting the biggest players in the music industry.
“It’s literally going to take the money out of independent labels and their artists, to benefit the biggest companies in the marketplace,” an unnamed senior exec at an indie record company told the FT.
“It’s going to benefit the biggest player, Universal, because they’re the ones with the resources to invest in that. Whereas the independent sector . . . we’ve found it hard to justify the expense of creating spatial masters… we’re not in the business of chucking money just because Apple is saying you should be spending money on this.”
“The new deal will badly impact our revenues,” another unidentified indie record label told FT.
Indie record companies are talking to Apple in the hopes of making changes to its new policy. If that fails, they will “explore legal or regulatory options,” the FT reported, citing people familiar with the matter.
Executives told the newspaper that producing tracks in Spatial Audio costs an additional USD $1,000 more per track, or around $10,000 per album. For a company like Beggars, which has a back catalog of 3,000 albums, reproducing their music in Spatial Audio would amount to a cost on the order of $30 million.
The FT noted that Apple had helped pay for some of the costs of reproducing tracks for Spatial Audio, but the help was not enough, in the view of some indie label execs.
Spatial Audio has become a big deal for Apple Music.
Since Apple launched the immersive sound technology on its streaming service in 2021, it has seen massive uptake – to the point that, in 2022, the service reported that 80% of its worldwide subscribers had used the feature.
Apple Music noted a 1,000% increase in Spatial Audio streams over the course of 2022, though it didn’t provide the actual number of listens.
That may help explain why Apple Music is now incentivizing the music creators on its service to expand their offerings available in Spatial Audio.
All the major recording companies have been working on creating Spatial Audio capabilities since at least 2019, with Universal Music Group and Warner Music Group partnering with Dolby Atmos to deliver spatial audio tracks, while Sony Music Entertainment has been working with Sony Corp’s 360 Reality Audio technology.
For Apple Music, Spatial Audio represents an advantage over its largest competitor, Spotify, which hasn’t yet released Spatial Audio functionality.
Amazon Music, meanwhile, offers what it says is a growing catalog of music in Dolby Atmos and 360 Reality Audio. Deezer and TIDAL also signed up for 360 Reality Audio when the technology launched in 2019.Music Business Worldwide
