When news that Apple was preparing to buy Beats Electronics for over $3 billion broke last week cynics and skeptics pointed to the company’s puny music streaming service, which only boasts around 200,000 subscribers compared to Spotify’s 10 million paying customers. However, it turns out the Beats Music user base could actually be even smaller than we thought, at least according to a leaked music royalties document obtained by The Trichordist.
It appears Beats Music had roughly 110,000 subscribers in March, and we doubt that number has gone up much in the months since then. The streaming service’s existing user base is mostly made up of AT&T customers who took advantage of the carrier’s three-month free trial and stuck around when it ended, and it seems unlikely Beats Music has seen much growth since the initial interest surrounding its launch. So why is Apple buying Beats? Everyone on the Internet seems to have an opinion on the question, but The Trichordist has a particularly interesting answer.
It may all boil down to Beats Music’s ridiculously low royalty rates, meaning the amount of money it pays to songwriters each time a song is played through its service. According to the leaked document, Beats pays just $0.000126 per play, while competitor Spotify recently revealed it pays between $0.006 and $0.0084 per play. Either way it’s tough for musicians to make a living off the music streaming model, but based on these numbers it would take roughly six plays on Beats to equal just one spin on Spotify.
AppleInsider notes these royalty rates likely won’t transfer over intact if Apple buy Beats, but if the deal also includes music mogul Jimmy Iovine it shouldn’t be too hard to re-establish the same cutthroat royalties. If Apple is able to pay just $0.000126 per play for the on-demand streaming service it could give the company a huge advantage against Spotify even if it’s starting way behind the competition when it comes to the size of its user base.