“This is about the new artist or band that has just released their first single and will not be paid for its success.”
Swift went so far as to threaten to withhold her smash-hit album 1989 from Apple’s burgeoning service, which is holding on the launch pad ahead of a June 30 debut. As one of the richest young stars in music, Swift crafted her statement as a sort of rallying cry for independent artists who would be most affected by the free trial. “This is not about me,” Swift said, “… this is about the new artist or band that has just released their first single and will not be paid for its success.”
If this all sounds strangely familiar, that’s because Swift made a very similar argument against Spotify a few months back, blaming Spotify’s free tier (which the majority of its listeners enjoy) for “perpetuating the perception that music has no value.” However, while Spotify CEO Daniel Ek shook off Swift’s rebuff, Apple — a company so big it makes Spotify look like a lemonade stand in comparison — caved.
So how was Taylor Swift able to force the hand of one of the most powerful companies in the world? (Hint: It wasn’t altruism)
Swift hate is bad, m’kay?
Quite simply, the very public shot at Apple from such an influential artist was exactly the wrong kind of press, at exactly the wrong time. Apple has been working on Apple Music for the better part of a year, including purchasing Beats Music, hiring veteran music celebrities like Trent Reznor to work behind the scenes, and cherry-picking famous DJs like the BBC’s Zane Lowe. More importantly, the company rearranged its entire music sales paradigm, moving from a model based solely on music downloads to one that includes streaming, a risky move in an already crowded streaming market (e.g. Spotify, Rdio, Pandora, Rhapsody, etc.).
Meanwhile, Swift is one of the most powerful figures in social media. Her original Tumblr post has over 75,000 “notes” and counting, and Wired reported that the post garnered over 63,000 favorites on Twitter and was retweeted 38,000 times. As one of the most loved companies in America, Apple relies on its good favor with the world of social media to keep its brand strong, and it’s going to need every bit of momentum it can get to upend its biggest competitor, Spotify. Which leads us to our next point.
When Spotify looks bad, Apple looks good
By cowering to Swift and reversing course, Apple looked a bit weak, and even a little confused about its plans for streaming. However, in the 24-hour news cycle, a moment of weakness is nothing in comparison to dominating one of your biggest foes. In one fell swoop, Apple was able to paint itself as a concerned company, somehow blissfully unaware of its wrongdoing, while throwing its biggest rival, Spotify, under the bus in the process. After all, Spotify famously stood up to Swift, while Apple’s Eddy Cue tweeted:
We hear you @taylorswift13 and indie artists. Love, Apple
— Eddy Cue (@cue) June 22, 2015
While Spotify comes off looking worse in this case, in many ways, the comparison to Apple in this context is an unfair one. Spotify’s perceived affront to Swift and her fellow musicians is anchored around the company’s core foundation: A blend of free and paid streaming services designed to convince freeloaders to eventually shrug off commercials, and opt to pay $10 per month for the service they’ve come to love. Whether you agree with Spotify’s model or not, the company has yet to turn a profit, and simply couldn’t upend its entire infrastructure that quickly, even if it wanted to.
Meanwhile, Apple’s decision to appease Swift was a much easier turnaround. The company had already worked out a deal with major labels to pay a higher percentage from streams after the free trial period — ostensibly an effort to compensate for lost royalties. But, instead of offering a similar deal to independent labels, Apple essentially told them to get bent — that is, until Taylor Swift made a fuss. In response, Apple simply dipped into its gargantuan coffers and set out to change the deals, like only Apple could.
Apple has more cash than the U.S. Treasury
In the history of the world, there have been few companies with more cash on hand — even when compensating for inflation — than Apple. According to CNN Money, at last count the company had over $178 billion in cash reserves.
Apple Music is entering the market with a backing of cash more powerful than any other competing service on the market.
To give you an idea of how much money that is, CNN estimates that Apple could potentially buy a few small startups like Disney (which owns ABC, ESPN, LucasFilms and Marvel Studios, we’ll remind you), Amazon, Netflix, IBM, Uber, and Tesla. The company couldn’t buy all of those at once, but it could throw down for a few at a time, like Amazon and Netflix — if the purchases were approved by the government, of course.
With that kind of cash at the ready, it was an easy decision for Apple to make an about-face and pay out for the three-month free trial. While Apple Music may currently be an underdog in the music streaming world, the service is entering the market with a full head of steam, and a backing of cash and clout more powerful than any other competing service on the market — by leaps and bounds. Bowing to Tay-Swift’s demand was easy.
Keeping them honest
In opting for a pay-only streaming service Apple has, in many ways, appeased artists who have pointed to free streaming as the leading cause of the notoriously low royalties common in streaming music. After all, Spotify’s 15 million paying members accounted for over 90 percent of its profits last year, while its 45 million free subscribers made up less than 10 percent through ad revenue. Without a free tier, Apple has aligned itself to be the new savior for an ailing music industry.
However, Apple came off looking a little greedy for not simply agreeing to pay the free-trial royalties in the first place. The company can rest assured that, should it toe that line again, powerful artists like Taylor Swift will be ready and waiting to shed a spotlight on the issues at hand. That’s a good thing for independent artists. And in the long run, a powerful streaming service that offers no free tier and values (or fears?) the opinion of artists like Swift could be good for the music industry as a whole.
But even after its latest goodwill/PR move, can Apple make a sizable dent in the streaming marketplace? With a launch date set for June 30, we’ll find out soon enough.
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