Buzz About Apple Web Radio
October 26, 2012

Is Apple’s Web Radio Deal For Real?

Michael Harper for — Your Universe Online

Pandora stockholders went for a wild ride yesterday when Bloomberg posted a report, dangerously entitled “Apple´s Online Radio Service to Challenge Pandora in 2013.”

As iPhone 5 madness was at its peak just before its official launch, the Wall Street Journal and the New York Times posted their own stories about a potential web radio service from Apple.

According to the Journal, Apple had only begun to reach out to record labels and even mentioned that this deal may never pan out.

Yesterday´s report from Bloomberg implied these conversations were becoming quite intense, saying this potential Pandora-killer could launch by March 2013. According to the Bloomberg piece, shares of Pandora stock began to fall just before Apple´s “little” announcement on Tuesday, picking up again when nary a word of a web radio product was announced.

Upon yesterday´s report, however, shares of Pandora stock plummeted again by 21%, closing the day with an overall decline of 11.7%.

As Pandora stock was crashing, the tech web was buzzing over the possibility of an Apple web radio service tightly integrated with those millions of iPads, iPhones and iPod Touches out in the wild.

CNET helped to douse the flames, however, releasing their own report, which held Apple´s web radio isn´t yet a sure thing.

According to their own “insider sources” Apple is, in fact, working diligently to draft an agreement with these record labels to begin their own web radio service. Some of these labels, however, aren´t yet pleased with the terms Apple has been pushing for.

CNET´s Greg Sandoval writes that this deal is currently stuck on the rates Apple is willing to pay. According to Sandoval´s sources, Apple wants to pay these labels less than what Pandora pays for the privilege to stream their music. This is particularly upsetting to the labels, as Apple also plans to let their customers do more with the music than Pandora listeners.

Sandoval also writes Apple is willing to give these labels a larger cut from advertising for the flexibility they desire.

It is on this point Sandoval and Bloomberg agree. In yesterday´s report, (and another report today, which adds a mention of the Pandora stock shock) Bloomberg claims advertising is the main sticking point between the iPhone maker and the labels. Apple likely sees these agreements as a way to grow their iAd platform as well as bringing in even more traffic to their iTunes store. The labels, on the other hand, likely see this as a way to advertise their artists and new releases.

Such a web radio service (or iRadio, as it´s being called by the labels) would almost certainly be an instant success. Apple owns 64% of the legal music market with iTunes, a major point these labels must contend with in their negotiations.

Bloomberg quoted one analyst from BTIG LLC in New York as saying an Apple web radio service is a “natural step” which would further their dominance in the music industry.

“If Apple offers a radio product, it will be far superior to anything else on the market,” said Richard Greenfield, who also suggests any Pandora shareholders sell their stock now.

For now, it seems Apple and the record labels will likely reach an agreement in the coming months, but maybe not as soon as Bloomberg initially predicted.