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 07, 2012

Match Game 2012: First Artist Payments from iTunes Match
by David Harrell

Compensation for labels and musicians for music sales from Apple's iTunes store is straightforward: Apple takes a 30% cut and passes the remaining 70% to the label or digital distributer. For Apple's iTunes Match service, compensation is a little more complicated. There's the same 70/30 split, as Apple shares 70% of the $24.99 annual subscription fee, but the per-track payout is variable, as explained in the FAQs of digital distributor CD Baby:
iTunes will issue payment for every play that takes place through iTunes Match. The per-play rate varies based on subscription revenue, exchange rates, and total number of plays. Pay rates should look similar to streaming services such as Spotify.
Over the past week, our first iTunes Match payouts showed up in our CD Baby account. For November 2011, we received .012767 cents per play (before CD Baby's 9% commission). For December 2011, we received considerably more: .12083 cents per play, before commission. That positive trend continued with per-play payments of .20231 cents for January 2012 and .25946 cents for February. UPDATE 6/8/2012: The above numbers are all for "iTunes Match - Americas." Some payments for iTunes Match - UK were just added to our CD Baby account. For February 2012, we received .13723 cents per play.

The best explanation I can think of for the increasing payout amounts is that iTunes Match keeps adding new subscribers who are making minimal use of the service to stream their tracks using different devices. That is, if an individual iTunes Match subscriber only listens to music on the device where her music was originally stored, no income is generated for labels and artists, thereby increasing the payout rate for tracks played by other subscribers.

As for the Spotify comparison, keep in mind that Spotify rates also vary, based on the subscriber's plan (free or one of two premium options), prices for different regions, and exchange rates. Last year, I posted that we had received per-play payouts ranging from a low of .02056 cents to a high of 1.1456 cents, with an average of .2865 cents. Since then, our average Spotify payment has increased to .41792 cents per play, so the current trend will have to continue for iTunes Match payouts to approach the average Spotify rate.

In theory, however, payouts from iTunes Match are a truly supplemental income stream, as unlike Spotify, there isn't the possibility of cannibalizing music sales with lower-paying streams. If iTunes Match becomes a popular service, it will provide some sort of an additional income stream to large labels, though how much of that revenue will make its way to the biggest artists is another question, as it is with the payouts from Spotify and other streaming services. But for smaller acts and labels, it's less likely that iTunes Match will be a significant source of new income.

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