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Why Taylor Swift Was Right to Take On Apple Music

By Daniel B. Kline – Jun 23, 2015 at 2:54PM

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The singer made a stand and shockingly the company changed its position.

It was never about bad blood. 

Taylor Swift always was respectful of Apple (AAPL -1.96%), but she disagreed with the company's plans surrounding the launch of its new music service with a free three-month trial. She wasn't against the free period -- she was opposed to the idea that artists wouldn't be paid when people listened to their work during that time.

Swift thinks artists should get paid when people listen to their music. She's been adamant about it and pulled her catalog from Spotify's ad-supported free service in an earlier dispute over essentially the same issue. In both cases, the singer, who may be the biggest artist in the world right now, was polite but decisive in explaining her position.

In this case, however, Apple quickly agreed, and Eddy Cue, Apple's senior vice president of Internet software and services, even took to Twitter (TWTR) to apologize and announce the change to its original plan to not pay artists during the trial period.

We hear you @taylorswift13 and indie artists. Love, Apple

— Eddy Cue (@cue) June 22, 2015

Source: Eddy Cue's Twitter feed.

Apple clearly misjudged how the creative community would react to its original plan. It doesn't seem as if the company was trying to take advantage of artists, but its method of compensating for the lengthy free trial didn't sit well with Swift, and probably not with many other performers too afraid to say anything about a company that controls such a large piece of the music business. 

What was Apple doing?
Apple executive Robert Kondrik is part of the team, along with Cue, that negotiates the company's music deals. He told Re/Code that in the United States, the company will pay music owners -- be they record companies or artists themselves -- 71.5% of all Apple Music subscription revenue. The number will vary outside the U.S., but it will average around 73%, he told the tech-news site, which confirmed the numbers with record labels.

Those payments, however, don't begin until after the free trial period. Kondrik told Re/Code that part of the reason Apple was paying a bit more than the standard 70% was to account for the free trial.

Why did Swift get mad?
Swift believes that artists should get paid whenever their music is listened to. She forced Apple's hand by puling her current hit album 1989 from Apple Music. She wrote a blistering but thoughtful piece on Tumblr, explaining that she was speaking up not for herself, but for artists more dependent upon royalties to simply stay afloat:

This is about the new artist or band that has just released their first single and will not be paid for its success. This is about the young songwriter who just got his or her first cut and thought that the royalties from that would get them out of debt. This is about the producer who works tirelessly to innovate and create, just like the innovators and creators at Apple are pioneering in their field ... but will not get paid for a quarter of a year's worth of plays on his or her songs.

Swift didn't address the slightly higher rates Apple would pay the rest of the year, which might be better for an established career artist such as herself over the long term. It was clear from her post that the singer/songwriter simply believes there should be no exceptions to the idea that artists need to be paid:

I realize that Apple is working toward a goal of paid streaming. I think that is beautiful progress. We know how astronomically successful Apple has been, and we know that this incredible company has the money to pay artists, writers and producers for the 3 month trial period ... even if it is free for the fans trying it out.

The "Blank Space" singer made her point, and Apple, to its credit, listened and acted accordingly.

Taylor Swift is right
Even though a slightly higher long-term royalty rate might have made her more money in the long run, Swift took up a position that may help others. Music is a cyclical business, and the band with the song of the summer may not -- in fact, more often than not won't -- go on to have a lengthy career. For example, let's look at the top five summer songs from 1993, according to Billboard (and the list is pretty typical for any year).

1. "Can't Help Falling In Love" -- UB40
2. "Whoomp! (There It Is)" -- Tag Team 
3. "Weak" -- SWV 
4. "That's the Way Love Goes" -- Janet Jackson 
5. "Lately" -- Jodeci  

Of these five artists, only Jackson had a big career, and at least one -- Tag Team -- had its only hit that summer. Had they not been paid by Apple for that three-month period, the percentage of total career earnings lost may have been significant. And while "Whoomp! (There It Is)" might still get some play at weddings or other events, it's hard to imagine that its trailing Apple Music revenue after its peak period would be enough, where the extra 1.5% over the long term would make up for the original loss.

Apple handled this well
The company made a mistake, but when presented with a rational argument why it was wrong, Apple quickly capitulated. That's refreshing, and it shows that the company values its relationship with artists.

The real opportunity here for the company and the musicians who create the music is doing deals where no record label is involved. That could happen because Apple is providing all the tools needed to launch new music -- be it a song or a record. For that to happen, artists need to trust the company.

Artists are often forced to give away their music on streaming services, and Apple Music could end up reversing that trend. If so, the company may have Swift to thank for stopping it from making a mistake at the beginning that could have derailed the whole project.

For a different view, read my Foolish colleague Jamal Carnette's take on "Why Taylor Swift Was Wrong About Apple Music."

Daniel Kline owns shares of Apple. He admits that Taylor Swift is the best pop musician going. The Motley Fool recommends Apple and Twitter. The Motley Fool owns shares of Apple and Twitter. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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