updated 06:00 pm EST, Wed February 8, 2012
Artists paid each time user re-downloads song
Most people know that iTunes Match, Apple's latest music-related service that offers to backup and make available whole iTunes libraries online, costs $25 year. While many assume the fee is at least in part a "bribe" to record companies to allow unlimited re-downloading, in fact Apple pays rights holders a fee each time a song is re-downloaded -- and for independent distributors who work with iTunes such as BandCamp, CDBaby and TuneCore, the royalty is a windfall for their artists.
Jeff Price of TuneCore, a popular digital music distribution label that handles artists major and minor, reported in a blog post that TuneCore has received over $10,000 in just the first two months of iTunes Match for TuneCore's artists. Apple takes 30 percent of the money it collects from iTunes Match subscriptions, and pro-rates the other 70 percent to distributors like TuneCore based on the rate of re-downloading of songs (whether streaming to an iPhone or re-downloading to an iTunes library).
Price mentioned in a follow-up comment that of the money sent to distributors, the copyright holder (which may or may not be the artist) gets 88 percent of that money (from which it pays out its own royalties as per its contract with the artist and publisher, if applicable). The actual songwriter(s) gets the remaining 12 percent, though Price didn't make clear if that's an industry guideline or just TuneCore's practice. TuneCore makes its money up front from artists directly and does not retain any portion of the royalties a song collects.
Although $5,000 per month (the average so far) spread among TuneCore's many artists will not amount to much per capita, Price refers to it as "magic money that Apple made exist out of thin air for copyright holders" and called the ability to generate revenue just by monetizing consumers' existing listening habits "amazing." The fee is not paid if a user simply plays a song on their own hard drive, but if they re-download it to their library through iTunes Match, a royalty is collected out of the $25 per user Apple charges.
"Some may complain that it's not much money," Price writes. "Well, before [iTunes Match] you were getting zero, now you are getting something."
Price disputed the notion that iTunes Match's fee represents an "amnesty" for those who illegally download music. He points out that iTunes Match does not exonerate users who pirate music, but that using iTunes Match does not get users "reported" to the RIAA either.
The service simply represents a way for artists to get paid for digital music beyond the original sale (if there was one), not dissimilar to how radio stations and other establishments pay a fee to ASCAP and BMI, the two largest music publishers, in order to play music and the money collected is distributed to copyright holders and artists.
Price mentions other services that hope to also monetize listening to music, such as Spotify, Simfy and Deezer -- but does not mention having received any comparable royalties from those services. He said such efforts are "bringing [needed] innovation" to the music industry, but that it will "take some time to learn which are the ones consumers want."