Apple Knuckles Under to Taylor Swift

Apple has given in to a demand from pop diva Taylor Swift to pay royalties to owners of music streamed by its forthcoming Apple Music service.

“We hear you, @taylorswift13 and indie artists. Love, Apple,” tweeted Eddy Cue, who oversees Apple’s content stores. “Apple will always make sure that artist[s] are paid.”

Cue’s tweets might resolve the firestorm Swift ignited when she pulled her album 1989 from Apple Music over the weekend.

She did that as a protest against Apple’s decision to withhold pay from writers, producers, or artists for the three months’ free trial offered to people signing up for the streaming service.

Swift portrayed Apple’s decision as “shocking, disappointing, and completely unlike this historically progressive and generous company” in an open letter to the company.

The Consumer’s Perspective

Reactions to Cue’s Twitter announcement on royalties were mixed.

“Artists deserve their money. Give it to them and this streaming thing will take off big time,” tweeted Sean Forester.

“This was all a conspiracy. Apple’s ‘policy’ was a chance to rile up Taylor’s fans and then reveal themselves as heroes,” contended Rev. Brad Kovach.

“They’re officially in cahoots. Apple “can’t risk NOT having Taylor,” he added.

“Looking more and more like a PR stunt,” tweeted Scott Bell.

“Taylor Swift literally just changed this whole game,” tweeted “rach.”

Apple’s Reversal

Apple’s decision “was not necessarily because of Taylor Swift,” said Mike Jude, a research manager at Frost & Sullivan.

Swift “may have been the canary in the mine. She may have indicated where Apple needs to go, but she’s not big enough to force them to change,” he told the E-Commerce Times. “There’s not a single artist out there whose portfolio approaches what Apple can spend on this issue.”

Swift was not the only artist who opposed Apple’s stance, but she was the best publicized.

Several small labels and independent artists previously have expressed opposition to Apple’s position.

One of the most prominent of these is Beggars Group, the largest and most influential group of independent labels in Europe, whose artistes include Adele, White Stripes, Basement Jaxx, Radio Head, Lou Reed and Queens of the Stone Age.

Apple Music’s deal structure was created without reference to any independents, Beggars Group said — arguing, in essence, that artists and rights owners shouldn’t bear the costs.

Apple’s Power Play

Unlike Spotify, Pandora and a host of other streaming music service providers, which offer ad-supported music free and charge for ad-free streaming, Apple plans to charge subscribers to its service from the get-go.

Individual subscribers will have to pay US$10 monthly for Apple Music. There is also a family plan, which covers up to six people for $15 a month.

Apple wanted to totally redefine the customer experience, but “they were going to make it harder,” Jude remarked.

“Streaming music has been defined by the Spotifys and Pandoras and lots of other companies, and so, to that extent, Apple has been asleep at the wheel,” Jude said.

Apple’s stance “made them look like they had too much power, and they remain at risk for antitrust or antimonopoly action,” said Rob Enderle, principal at the Enderle Group.

The company “didn’t negotiate with the independents. They dictated rules, and some might argue there was no negotiation with the big labels either,” Enderle told the E-Commerce Times. “If this is true, that would make Apple vulnerable.”

A Question of Strategy

Apple’s massive dominance in the music industry means it remains at risk for antitrust and unfair trade practices charges, Enderle explained.

The way Swift’s post is worded makes things worse because it sounds “like Apple had excess power, likely causing red flags to go up in [Apple’s] legal department,” he speculated.

The problem wasn’t so much that Apple’s vaunted marketing team was asleep but that its legal team “was out of the loop,” Enderle suggested.

Apple “may have caught this one in time,” he said, and the turnabout in its stance on royalties shows it’s better at revising plans as needed.