Music studios continue to balk at Apple's (AAPL +0.8%) royalty terms for its planned Web radio...


Music studios continue to balk at Apple's (AAPL +0.8%) royalty terms for its planned Web radio service, industry sources tell the NY Post. Whereas Pandora (P +2.8%) pays $0.12 per 100 streamed songs and iHeartRadio $0.22, Apple is said to have made an initial offer of $0.06. Is Apple playing hardball out of a belief the Internet Radio Fairness Act (something apparently on the minds of studios) gives it some leverage? The report could be helping Pandora rally ahead of today's FQ4 report. (previous) Update: The NYT reports stalled licensing talks have led Apple's service to be delayed at least until summer.

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Comments (17)
  • DIgitalMediaView
    , contributor
    Comments (631) | Send Message
     
    How could this be good news for P, that AAPL is in new talks to launch a directly competitive service? See NY Times, which confirms that iRadio may be delayed until summer, and provides lots of color: "Apple wants to preload an app on its mobile devices that can deliver a free stream of songs tailored to each user’s taste and supported through its iAds advertising platform. Such an app would have a vast potential audience. It would also pose a threat to Pandora..." (http://nyti.ms/10lRgXx). Does a delay of a few months save P from this huge competitive challenge?
    7 Mar 2013, 01:27 PM Reply Like
  • DIgitalMediaView
    , contributor
    Comments (631) | Send Message
     
    It's important to add that the per stream rate is just half the deal. Journalists are missing this because it's more complicated than writing headlines. For companies like P that opt into the "pure play rate," they pay the greater of the per stream rate and 25% of total revenue. Clear Channel pays the higher stream rate cited above because as a media conglomerate, like CBS and others, it won't opt into a rate floor of 25% of its total business. If AAPL succeeds in getting its deal done, it means they came up with something as a good alternative to the 25% floor that the labels like enough to trade for a lower per stream, which would allow Apple to economically ramp up the service (despite recent "hard times" AAPL didn't become #1 in music or tech or among public cos. by making bad deals). The fact that this is taking some time isn't a huge negative for AAPL because no diversified conglomerate has solved the business model challenge yet. And a delay until later this year is hardly salvation for P, nor is this deal a signal that Congress will step in and save them, since iRadio's rates will be the result of at-will negotiation, not another instance of regulatory inequity (vis-a-vis SIRI), which is what IRFA was supposed to address.

     

    And thanks to SA editors for noting the NYT update, above.
    7 Mar 2013, 02:15 PM Reply Like
  • JUDOKA
    , contributor
    Comments (404) | Send Message
     
    Can anyone else find something bad about Apple?I hear Tim Cook has nail fungus.Sell the stock and shut up!!
    7 Mar 2013, 01:46 PM Reply Like
  • Applocrat
    , contributor
    Comments (1005) | Send Message
     
    Apple needs to get this deal done quickly, before someone else sweeps in, undercuts them and sets the bar that much lower.
    7 Mar 2013, 01:59 PM Reply Like
  • kf6spf
    , contributor
    Comments (4) | Send Message
     
    I hear Apple's service would only allow you to stream music you already own (i.e. your iTunes Library). Why should we, as consumers, be forced to pay extra - every time we listen to it - for music we have already paid full price for?
    7 Mar 2013, 02:10 PM Reply Like
  • DIgitalMediaView
    , contributor
    Comments (631) | Send Message
     
    This would be for a new service that competes with Pandora, which would be free to consumers.
    7 Mar 2013, 02:46 PM Reply Like
  • pfbsurf
    , contributor
    Comments (142) | Send Message
     
    that makes no sense. reference please.
    7 Mar 2013, 03:08 PM Reply Like
  • DIgitalMediaView
    , contributor
    Comments (631) | Send Message
     
    pfbsurf, if that question is directed to me, what is being planned by Apple is a new free-to-consumer ad-supported Internet radio service that would compete directly with Pandora, which is also offered free to consumers. This would be in addition to iTunes. The NYT story provides service details. http://nyti.ms/10lRgXx
    7 Mar 2013, 03:19 PM Reply Like
  • Applocrat
    , contributor
    Comments (1005) | Send Message
     
    Apple needs to show themselves to be the friends of the music industry, and most importantly the artists, by paying more, not less. I would suggest allowing users to buy streaming time via iTunes purchases and perhaps even providing ways for users to pay artists directly.
    7 Mar 2013, 02:11 PM Reply Like
  • WilScheung
    , contributor
    Comments (21) | Send Message
     
    You've never dealt with execs in the music industry before, have you?
    7 Mar 2013, 02:40 PM Reply Like
  • XRTrader
    , contributor
    Comments (711) | Send Message
     
    Applocrat - iTunes has already become a great mechanism for relatively unknown artists to sell individual songs (versus previously on CD, whole albums) to customers in a fast/efficient market.

     

    I don't know about you, but my friends and I buy and check out many more small artists now that we can just sample one good song.

     

    iRadio would similarly increase the exposure of small artists, and of course, if you liked the song you could buy it via iTunes. In this way iRadio could lead to sales of music, while Pandora cannot. Apple also has many more resources, and devices through which to promote iRadio.

     

    So, I think they can pay a lower price per song streaming - at the promise of sales boosts that would not occur with other iRadio providers.
    7 Mar 2013, 04:32 PM Reply Like
  • Applocrat
    , contributor
    Comments (1005) | Send Message
     
    true X-r thanks for the response. Wasn't being a doe eyed idealist either. Technology empowers individuals to create and distribute their own work. Creators are freeing themselves from the standard distribution channels and becoming the power brokers in these value chains. In order to maintain their position in the industry apple must focus on the needs of artists going forward.

     

    I agree that they understand this perhaps better than any of the other major players. Look at what the App Store has done for "small" developers for further proof.
    8 Mar 2013, 10:40 AM Reply Like
  • Jeff Hartzer
    , contributor
    Comments (6) | Send Message
     
    If Apple's streaming blows as badly as the latest version of iTunes, I am sticking with 'classic' Pandora(#P).
    7 Mar 2013, 04:00 PM Reply Like
  • bgold1955
    , contributor
    Comments (2350) | Send Message
     
    Used to love P playing music via the free app. However, the related artist playback has become less good and artist selected songs are fewer. Probably trying to force me to pay and if I want it I guess I will. But not yet.
    7 Mar 2013, 04:16 PM Reply Like
  • grumbles
    , contributor
    Comments (91) | Send Message
     
    there goes apple again with the big bull in the room mentality. the music industry should tell them where to go. look at leap wireless and sprint signing ridiculous agreements and now they are losing money by the bucketfull and leap has 100 million unsold inventory. way to go dumbos
    7 Mar 2013, 07:04 PM Reply Like
  • adrian816
    , contributor
    Comments (177) | Send Message
     
    Piracy-free music paid for by adverts with potential extra income from music sales on itunes - how can the music industry miss exactly what this represents? Is the music industry too greedy to grab the best business opportunity in a long time by insisting on higher royalties than can be agreed by a negotiated settlement?
    29 Mar 2013, 07:06 PM Reply Like
  • Applocrat
    , contributor
    Comments (1005) | Send Message
     
    You do know that this time last year people were thinking Sprint was going bankrupt? The company has rebounded and the stock has more than doubled since then.
    8 Mar 2013, 10:44 AM Reply Like
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