Taylor Swift scored one against Apple Inc. Sunday in a battle over royalty rates and free music streaming, but the real significance of her feat will turn on still-undisclosed details.
Apple, meanwhile, may not be as bruised as it first appears: The money involved is insignificant for the tech giant, and the company's rapid change of heart may win some goodwill in the entertainment industry.
Apple abruptly reversed course Sunday night, retreating from a plan to not pay royalties to artists when users sign up for a three-month free trial of Apple Music, its subscription service set to debut on June 30.
The switch came soon after the hugely popular singer, in an open letter to Apple, blasted the no-royalty plan as "shocking, disappointing," adding her voice to a chorus of complaints from artists and producers. "We don't ask you for free iPhones. Please don't ask us to provide you with our music for no compensation," she wrote in her blog on Tumblr.
Now may come the hard part: Figuring out how much Apple will pay each time a person listens to a song. Streaming services like Spotify AB and Rdio Inc. set their royalty rates by amassing all their subscription fees for each month, then dividing the pot among the millions or billions of "listens" in that month. Last December, on Spotify's subscription tier, that amounted to 0.68 of a cent per listen in the U.S.
Services have devised different ways to compensate record companies and artists during promotional offers. For example, people in the music industry say Spotify pays half its normal subscription royalty rate for listens during its promotional period, when subscribers pay 99 cents for three months.
Spotify also offers a free, ad-supported service, which pays royalties about one-fifth of the subscription service. In December, that amounted to 0.14 of a cent per listen in the U.S.
That month, Spotify paid a total of $ 25.7 million in royalties for its subscription service and $ 5.8 million for its free tier, according to data the company gave music publishers.
If Apple matches what Spotify pays during its trial period, it could mean that Ms. Swift's Tumblr post added tens of millions of dollars to Apple's cost of starting the new music service. Still, such sums would be immaterial for Apple, which reported net income of $ 13.6 billion in the three months ended March 28, and reported holding $ 193 billion in cash.
Apple declined to say how much it plans to pay during the trial period, though it said the rate will increase once customers start paying for subscriptions. In the first three months of the service's life there will be no subscriber royalty rate on which to base the rates. The company could find other ways to calculate a rate and is expected to share its plans with music companies soon.
Apple risks raising the ire of Ms. Swift and others if it comes in with what would appear to be a lowball offer.
Ms. Swift responded to Apple's reversal by writing on Twitter that she was "elated and relieved." She stopped short, however, of committing to release her most recent album, "1989," on Apple Music. She has kept that album off all subscription services, in a bid to preserve sales of downloads and CDs.
Her record company, Big Machine Label Group, didn't say whether "1989" would be available on Apple Music. The rest of her catalog is available on several subscription services, including Rdio and Rhapsody.
The sequence of events could help Apple position itself as responsive to artists' concerns—something that hasn't been true for many technology companies lately. Ms. Swift pulled all of her music from Spotify's free tier, because she says its royalty rates are too low.
Others in the music industry said the issue was more about appearances than about dollars and cents. Some record companies had viewed the three free months as a worthwhile price to pay for another concession from Apple: Higher royalty rates than competitors like Spotify and Google Inc. pay. Apple is to set aside 71.5% of gross revenue for royalties, compared with 70% the others pay.
Others questioned the rationale for not paying anything during the trial run. Martin Mills, chairman of Beggars Group, an influential London-based independent music company that has yet to sign a deal with Apple, wrote in a blog post last week: "We struggle to see why rights owners and artists should bear this aspect of Apple's customer acquisition costs."
Mr. Mills declined to comment.
Write to Ethan Smith at ethan.smith@wsj.com and Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com
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