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Apple's costs for bowing to Taylor Swift's demands will be peanuts

Gregg Keizer | June 24, 2015
Apple's quick decision to pay artists royalties during the three-month trial of its new streaming service could set it back more than a half billion dollars, or less than a hundred million, a rounding error on the Cupertino, Calif. company's books, analysts said today.

Jan Dawson, chief analyst at Jackdaw Research, also covers the digital music industry, but he came up with a different number than Sinnreich. That wasn't a shock. "There are a lot of variables, a lot of wrinkles in any estimate," Dawson admitted up front before taking a stab.

Dawson figured on a bigger uptake -- 250 million users -- primarily iPhone owners, who number about 450 million worldwide, and a less aggressive play, with an average of 200 tracks per month (compared to Sinnreich's 100 streams per week, or 400 each month).

Where the two analysts' takes parted ways was remuneration. Dawson put it at half a cent per stream, a rough estimate he based on Spotify's outlays for both its paid subscriptions and its ad-supported side. The former compensates artists at a higher rate.

Dawson's bottom line for Apple: about $750 million during the first three months.

While that was more than 10 times Sinnreich's tally, it would still be small potatoes for Apple, amounting to 1.3 percent of the company's $58 billion revenue during the March quarter, or 5.5 percent of the $13.6 billion in net profit.

"These are very rough back-of-the-envelope estimates," Sinnreich acknowledged. "But it's not a lot of money. That really needs emphasis. This is not about the money. This is not about the short-term money. This has nothing to do with this year, but about setting the terms of the relationship with the different stakeholders in the [music] distribution chain," Sinnreich said.

 

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