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… It is a “very thoughtful and conscious decision” according to CEO Ian Rogers.  The fact that Beats Music costs $9.99 a month and does not offer an ad-supported free option sets it apart from almost all other services (Google Music All Access = not free).

Beats Music does not believe it needs to use ‘free’ as a marketing tool.  Other services may use their free tier initially to get people interested, but always intending to convert them to a subscriber.

From its inception, Beats Music has been focused on being fair to artists (after all, Trent Reznor is the Chief Creative Officer).  Artists have long been frustrated with digital music services mainly because they do not know exactly how much they get paid from each listen.  By not offering a free tier, Beats Music is making their business fundamentally different than their competitors.  They appear to be more committed to transparency for artists and are vowing to pay independent labels the same royalty rate as major labels.  Rogers says in a statement:

While other services may try to get away with paying independent labels and artists less, we’re paying all repertoire-owners equally because it’s the right thing to do

An artist asks, “why do I get paid different amounts for the same song being streamed?”

Clarity comes when you understand that ‘free’ ad-supported music pays out less money to the artist than a song being streamed by a subscribed customer.

Think of it as two different pots of money.  One pot is fed from advertising which depends on how many ads were served-up and how often the song was played.  This can change day by day as popularity moves up and down.  The second pot of money comes from subscribers and is a set amount.  When the song is played the artist gets a percentage from the subscribers pot of money.  This is where the business can flourish.  The more subscribers, the bigger that pot of money, consequently the larger the pay-out to the artist per stream.  Yes, I know, this is over-simplified.

Since Beats Music is not offering a free tier, it essentially insures that they pay artists more.  The caveat is, this model does not work unless they scale up to millions of subscribers.