IMPALA - the pan-European organisation for the independent music community - has criticised Apple's decision to treat spatial available recordings more favourably when calculating royalty payments each month.
It's a move that has "negative consequences for parts of the industry, particularly for independent labels and their artists", the group says. This is because, as tracks made available in spatial audio earn more under Apple’s new system, those tracks which are not will earn less. And indies can’t necessarily afford to deliver their music in spatial audio formats.
In a statement, IMPALA stresses that it supports reform of the streaming business model and appreciates efforts to improve sound quality, but argues that those two things should not be connected. "IMPALA invites Apple to discuss alternative ways", it goes on, "rather than unilaterally introducing significant changes, resulting in the redirection of revenues from independents to be redistributed among the major players".
Apple updated its licensing deals with record companies and music distributors late last year to add a spatial available bonus, which then went into effect last month. Many in the independent sector were unaware of the consequences of the updated licence - and even where some companies did highlight issues to Apple, the new agreement was presented as non-negotiable.
Where a track is available in spatial audio, any play of that track - in any format - will now count as 1.1 plays. However, Apple is not adding more money into the royalty pool to enable this bonus. Instead, it is splitting the existing royalty pool into two. This means that when Apple allocates the bonus to spatial available tracks, tracks that are not eligible for the bonus are allocated less money.
Not only that, but - as CMU exclusively revealed last month - each licensor has to meet a one-time threshold before it is even eligible for the bonus. Where an independent label does not have its own licensing agreement with Apple Music and uses a distributor or other aggregated licence, it is that licensor that must meet the threshold across its entire catalogue.
So, in the case of a label using the distributor, the distributor would need to hit the threshold. As a consequence, many individual labels could provide their entire catalogue as spatial audio but still not be eligible for the spatial bonus. This means that independent labels are disadvantaged on two fronts.
First, they may not be able to afford to remaster a significant portion of their catalogues in spatial audio. Secondly, if they are using a distributor, they don't have insight on the performance of the wider catalogue delivered by that distributor - including how much of the catalogue has been delivered as spatial audio and what percentage of streams are coming from spatial available tracks - and therefore don’t know how close the distributor is to reaching the threshold where the spatial bonus kicks in.
Meanwhile, the majors - with more resources to provide their catalogues in spatial audio and full knowledge of what is required to meet the threshold - benefit from the bonus from the off.
For Apple, the spatial audio bonus is mainly about encouraging more of the industry to provide recordings in that format, because it is pushing immersive audio in order to sell more devices on which people can enjoy that experience.
However - as with the changes to payment models made by Deezer and Spotify - the spatial bonus will also result in more streaming money going to the majors and less to grassroots artists and labels. Though the Apple changes will likely negatively impact more established indie labels than the alternative changes being made by its rivals.
“We support moves by services to recognise sound quality in a way that is objectively fair and sustainable", says IMPALA’s Executive Chair Helen Smith. "Our invitation to Apple on this proposal is to look at alternative ways to achieve this rather than linking it to streaming reform".