RUSH: Apple and Taylor Swift. There’s more to this than you may think. There is. As you know, Apple on June 30th is going to announce/introduce/release/inaugurate their own music streaming service, because people don’t want to buy tunes anymore at 99Â¢. They want to stream them.
Apple tried the streaming business in kind of a half-sorted way with iTunes Radio but it didn’t really take off, and now they’re going full-bore into it. They are offering — they’re gonna offer — a three-month free trial, and then after that it’ll be $9.99 a month. And Apple said (paraphrase), “By the way, since there is nobody paying for the service for the first three months, we aren’t going to be paying any royalties either to the artists or the writers, the performers.”
Of course, this did not sit well with the music industry, which is having a tough time. The biggest problem the music industry is having is generational. Millennials have grown up with music free as a bird on YouTube. Millennials, the last thing they ever expect to have to pay something for is music. It has been free from the first moment they got interested in it, and as such, people that get into the streaming business are having a difficult time monetizing it.
The royalties, therefore, being paid to artists and performers are getting smaller and smaller and smaller. And because the customer expects music to be free, everybody on the production side is saying, “Hey, wait! What about us? How are we going to get paid?” It took Taylor Swift — who is one of the few artists who still sells albums in great quantity. Taylor Swift’s latest album, “1989,” she sold eight or nine million copies of it since late last year.
Very few artistes sell albums. People won’t buy albums. They stream songs. I mean, some people download albums. Some people… There are still purchases, but it’s nowhere near the way it used to be the primary consumption of music. And more and more people, as I say, when you tell them that they’re going to have to pay to listen to music, they get offended. That’s not something that they do.
In fact, it’s not just music. Millennials have grown up expecting a lot of stuff to be free. It’s why they hate the cable companies. It’s why they hate the phone companies. It’s why they hate the electric companies. It’s why they hate the car companies. Because they charge them! They hate to have to pay for anything. Taylor Swift comes along and says, “Hey, Apple? You don’t give us free iPhones. Why should we musicians give you our music for three months just so you can establish a streaming service?
“Why should we let you use us for free while you establish something you hope to profit big time off of?” Well, Apple caved inside of 20 minutes. But there’s more to this. If I were to tell you that what Apple is really intending to do is increase the royalties paid to artists by virtue of the three-month trial — they are! That’s one of their objectives. The musicians and artists said, “Okay, then all you executives at Apple, go without your salaries for three months and see how it feels.”
I mean, some really reasonable, counter-arguments were presented, and Apple — with at least $200 billion in cash hanging around — had no choice but to cave here. But what their ultimate objective is, with the three-month trial, actually will be more beneficial to artists, performers, producers and so forth than anything in the streaming business now, simply because of size.
I will explain this to you as the program unfolds before your very ears. (interruption) Well, the… The objective is Apple wants to put Jay-Z out of business. They’d love to put Spotify out of business. By the way, there’s another thing nobody’s talking about here, yet. But can Apple just…? I mean, Spotify and Pandora, they won’t have this kind of money. They couldn’t do this!
Is there some sort of legal…? Can Apple just legally pay these artists out of pocket? I don’t know, folks.