Apple looking to create music streaming service, wants to pay significantly less in royalties than Pandora

Thu, Mar 7, 2013


Amid rumors that Apple is attempting to roll out its own music streaming service comes a report from the New York Post which claims that Apple is attempting to pay record labels even less money in  royalties than they currently receive from sites like Pandora.

Apple is reportedly offering about 6 cents per 100 songs streamed compared to the 12 cents per 100 songs streamed that Pandora currently pays.

While the labels would admit Apple’s music service could tap a whole new revenue stream for them, they are loath to say yes to the 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 hoard of roughly $137 billion — ought to 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.

Interestingly enough, Spotify, everyone’s favorite subscription based music service pays record labels 35 cents per 100 songs streamed.

So why does Apple want to get into the music streaming business? Well to be blunt, music streaming is huge. Not only does 50% of Apple’s iTunes revenue come from purchases on mobile devices, note that Pandora is a hugely popular application and it would make sense for Apple to want a piece of that pie.

But the music labels aren’t as willing to get into bed with Apple as they once were. The music industry is thriving and Apple’s negotiating position isn’t as strong as it once was as a result. Consequently, the music labels aren’t opposed to a streaming music service from Apple but want upfront payments in addition to a percentage advertising revenue.

via NY Post



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