Digital Audio Insider -- the economics of music and other digital content

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Digital Audio Insider is David Harrell's blog about the economics of music and other digital content. I write from the perspective of a musican who has self-released four albums with the indie rock band the Layaways.

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June 21, 2011

Some Details (and Questions) About Apple's iTunes Match Service
by David Harrell

A Chicago label is getting some attention for opting out of Apple's iTunes Match service. Numero's Ken Shipley also shared some financial details about iTunes Match in a comment to a recent Hypebot post on Numero's decision. Based on that information, we can make some assumptions about how the service will work:

1. Apple Is Reaching Out to Indie Labels
We know that all four major label groups are on board with iTunes Match, but it appears that Apple is contacting at least some indie labels directly to convince them to include their catalogs in the matching service.

2. A Match Is Enough
I had wondered if payments to labels might be based on the number of times a track was played. But the way Shipley describes it, if a track is contained in an iTunes library, that constitutes a "match," and a payment to the label.

3. The Per-Track Payouts Are Small (and Variable)
This was a given, of course. At $24.99 a year, there's simply not a lot of cash to share with labels. Shipley gives a figure of .0035 cents per match for a 5,000 track library, of which .0006 cents would be shared with the publisher of the song. However, I'm wondering if he meant .35 cents instead of .0035. Apple will share 70% of the $24.99 annual subscription fee, or $17.50 with labels. If you multiply 5,000 by .35 cents, it equals $17.50. Assuming that the payout is the larger figure, it'd still require 200 matches to equal the 70 cents that Apple pays for a 99-cent iTunes download. Though if the payout is based on the size of an individual user's iTunes library, the per-track amount will vary. Apple says it will support libraries of up to 25,000 tracks. If you divide $17.50 by that number, the per-match rate would be .07 cents.

4. Avoiding the "S" and "D" Words
At this point, no one seems to know for certain if matched tracks will be streamed by Apple to a device or if a match simply allows a subscriber to download the track. I thought the language on Apple's site suggested streaming, though I've read that it's a download, as Apple is worried that streaming would result in a huge bandwidth/data problem if iPhone users streamed their music collections all day.

According to Shipley's comments, Apple is avoiding both the "streaming" and "downloading" words because they don't want to be liable for current streaming rates or mechanical royalties.

We'll learn more details over the summer, but for now, here are a couple of unanswered questions:

1. A One-Time or Annual Payment?
Will a label receive a payment every year, as long as the track remains in a user's iTunes library? Given that subscribers pay the $24.99 maintenance fee each year, it seems more likely that it's an ongoing payment.

2. Is a Match Based Solely on Metadata?
While Apple has been lauded for coming up with a model that results in a revenue stream for music that might have been obtained illegally, that's a negative in Shipley's view. Whatever the quality/bit rate of the file on your hard drive, iTunes Match will upgrade it to 256k AAC file. Yet if the match is based solely on a music file's metadata, you don't even have to obtain the actual track -- you could simply change a file's metadata in iTunes or another program. It'd be a pain, but that with a few clicks and a bit of typing you could match any track in the iTunes catalog.

If you work for a label and can confirm any of the above, or have other details you're willing to share, please leave a comment or shoot me an e-mail. Thanks!

related: Some Quick Thoughts On iTunes Match

tags: digital music iTunes iTunes Match Apple AAPL music subscriptions

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THE LAYAWAYS

Out Now -- "Maybe Next Year" -- The New Holiday Album:

"This is a sweet treat, deliciously musical without being overbaked for mass media consumption." -- Hyperbolium

"Perfect listening to accompany whatever holiday preparations you may be making today." -- Bag of Songs

O Christmas Tree - free mp3 lyrics and song details
Away In A Manger - free mp3

Download from eMusic, iTunes, Amazon MP3, or Bandcamp. Listen to free streams at Last.fm.

"...about as melodic and hooky as indie pop can get." -- Absolute Powerpop

"Their laid-back, '60s era sounds are absolutely delightening." -- 3hive

"...melodic, garage-influenced shoegaze." -- RCRD LBL

Where The Conversation Ends - free mp3
January - free mp3
Keep It To Yourself - free mp3

Download from eMusic, iTunes, Amazon MP3, or CD Baby, stream it at Last.fm or Napster.

"The Layaways make fine indie pop. Hushed vocals interweave with understated buzzing guitars. The whole LP is a revelation from the start." -- Lost Music

"Catchy Guided by Voices-like rockers who lay it on sweetly and sincerely, just like Lionel Richie." -- WRUV Radio

Silence - free mp3 lyrics and song details
The Long Night - free mp3

Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.

"These are songs that you want to take home with you, curl up with, hold them close -- and pray that they are still with you when you wake up." -- The Big Takeover

Let Me In - free mp3
Ocean Blue - free mp3

Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.

More Layaways downloads:

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