Even though Spotify has twice as many paying subscribers as Apple Music, it seems that Apple still puts more money into the pockets of songwriters and music publishers than its rival does, with a new report revealing that Apple has just paid out more royalties than any other single streaming service.
According to The Mechanical Licensing Collective (MLC), the non-profit group that handles the collection of royalties from digital service providers like Apple and Spotify for distribution to music publishers and songwriters, a total of $424,384,787 in “accrued historical matched royalties” have been received from 20 different providers, with 38 percent of that amount coming from Apple Music alone.
To be fair, Spotify wasn’t far behind, contributing $152,226,039 to that total, however when you consider that it recently reported 155 million premium subscribers and 345 million monthly active users, one would expect its contributions to be proportionally larger than what would come from Apple, which is estimated to have about half as many paying subscribers.
While Apple doesn’t regularly disclose subscriber numbers for its services business, it did report crossing 60 million back in June 2019, so by most estimates, it’s hovering somewhere around 70–80 million at this point.
Royalty calculations for streaming services can be a bit complicated, especially in the case of these “accrued historical unmatched royalties,” it still suggests that Apple Music may have a much higher number of “listens-per-user” than some of its rival services.
Still, the contributions from Apple Music and Spotify collectively dwarfed every other streaming service on the list, with the third largest contributor, Amazon, only coming in at 42,741,507, followed by Google/YouTube in fourth place at 32,855,222. The only other two eight-figure companies on the list were Pandora and SoundCloud.
What Are Mechanical Royalties?
Firstly, while it’s a somewhat archaic term, it’s important to understand that “mechanical royalties” are those copyright fees that are paid to songwriters and music publishers, and not to performers or other artists. While in many cases that may be the same people, that’s not always true, especially in the case of popular songs that get performed by multiple artists and cover bands.
Either way, however, it’s a different class of royalty fee with a rate that’s actually set by the U.S. Copyright Act, rather than directly by the music labels, although of course songwriters, music publishers, record labels, and digital media and streaming companies all have input into the process.
As an aside, this is why Apple has been praised by songwriters, since it’s been unique among streaming services, standing by in tacit support of artists as Spotify and others push back in opposition to the payment of higher royalties to songwriters and music publishers.
What Are Accrued Historical Unmatched Royalties?
Unmatched royalties, also known more colloquially in the industry as “black box money” result from those songs that are streamed where the actual owner of the composition cannot be easily determined. Normally, digital service providers pay out both recording and mechanical royalties each time a song is streamed, however while the performer is generally pretty obvious, the songwriter — that is, the owner of the actual composition — may not be.
With very few exceptions, every song that’s streamed on Apple Music, Spotify, or any other service should have a mechanical royalty payable, but of course if the service provider can’t identify the actual composer, there’s nobody to write the cheque to, which means that until recently, they’ve had no choice but to sit on the money.
Back in 2018, however, the U.S. passed the Music Modernization Act, which set up a means for digital service providers to get these piles of money distributed to the actual songwriters. Under the new act, the MLC was set up as a clearing-house to receive these unmatched royalties and do the legwork of figuring out who they should actually be paid to.
To put this in perspective, along with the $424 million in payments, The MLC also collected more than 1,800 data files from Apple, Spotify, and the others, containing more than 1.3 terabytes and 9 billion lines of data.
It’s these billions of entries that represent all the listens on Apple Music and other services that the MLC is now going to have to pore through and match up with the actual copyright holders of the compositions, so that these songwriters can actually get properly compensated for their work.
The Mechanical Licensing Collective obtaining this historically unmatched money, doing the research to find its owners, and giving copyright owners a transparent process to claim what is theirs is exciting progress that paves the way for the future growth of streaming that will benefit the entire industry.David Israelite, President/CEO, National Music Publishers Association
David Israelite, the President and CEO of the National Music Publishers Association, who has also praised Apple for “continuing to be a friend to songwriters,” told Variety that this “unmatched money” has “plagued the industry” for years as songwriters and music publishers have fought to ensure they were paid fairly by digital streaming services.
Going forward, the MLC will be administering a new “blanket license” that will cover musical works that are available on U.S.-based streaming services, allowing companies to distribute permanent downloads, limited downloads, and interactive streams by securing only one license instead of working on a song-by-song or share-by-share basis. This should help to eliminate the problem of unmatched royalties entirely, as distributing payments will be handled entirely by the MLC, ensuring that they can get paid out to publishers and songwriters in a much more timely fashion.