Apple has opened talks with record labels about getting rights for a music-streaming service — but has gotten plenty of push back because its offer is seen as way too cheap.
Apple made an initial offer to the label of about 6 cents per 100 songs streamed, sources said. That’s about half of the 12 cents per 100 songs paid by Pandora, the leading online radio service that Apple is taking aim at, sources said. “Apple wants a rate that is lower than Pandora’s,” said one high-level executive.
While the labels would admit Apple’s music service could tap a whole new revenue stream for them, they haven’t agreed to any offer as the industry is fighting on Capitol Hill to prevent Pandora from lowering its current rate, sources added.
Music label insiders suggest Apple — which is sitting on a cash pile of roughly $137 billion — should pay at least the rate set by the Copyright Royalty Board, or about 21 cents per 100 songs streamed. That rate applies to companies that don’t own broadcast operations. By comparison, terrestrial radio-backed online services (such as iHeart) pay about 22 cents per 100 songs streamed. Subscription service Spotify pays the highest rate for its service, 35 cents per 100 songs streamed, sources said.
Apple wants to get into the streaming radio business, in part, because it is seeing 50 percent of its iTunes revenue flow from mobile. Pandora is one of the most popular apps. Apple views radio as a way to make better use of its iAds advertising platform. An Apple iRadio product would be ad supported.
The music labels, for their part, want an upfront fee and a percentage of that ad revenue in addition to the streaming fees, said sources.
Apple’s chief music negotiator, Eddy Cue, created a lot of static last September when he tried to get the industry’s biggest music publisher, Sony/ATV, on board.
Apple, sources said, had hoped to rush iRadio into the iPhone 5 launch, but was forced to backpedal. Sony/ATV’s resistance meant that Cue needed to first deal with the recorded music giants: Universal, Sony and Warner. Reps for each declined to comment.
“Everyone’s had their initial meetings and everyone is preparing counters,” said a source.
Apple is considering a launch of iRadio as part of a bundle along with iMatch, which allows iTunes users to make their music available on all iOS devices. The Cupertino, Calif., company also wants to make the iRadio service available abroad in the UK, Germany and France as well as other places.
Rich Greenfield, media analyst with BTIG, told The NY Post, “People spend two hours a day listening to radio. Google, Apple and Amazon are fascinated by the opportunity to get into music in a bigger way. Pandora doesn’t make any real money.”
Greenfield added: “Everyone’s trying to figure out a better structure. I wouldn’t say any of them are giving up.” Source: NY POST