March 8, 2013
Music Industry Rebuffs Apple’s Bid To Lowball Price On Radio Rights
Michael Harper for redOrbit.com — Your Universe Online
Last year, The New York Times and others news agencies began reporting Apple was preparing to release their own Internet radio, offering to compete with (and likely destroy) Pandora. In the months since these first reports went public, it´s been discovered Apple does in fact have the intention of launching their own service, but they´ve as yet been unable to get terms and conditions to their liking.
Today, the New York Post shed even more light on the matter. Apple´s radio plans have again been stalled, largely due to the price they´re offering the labels for the rights to stream their songs — a paltry 6 cents per 100 tracks.
According to the Times, Apple planned to roll out this service when the Grammy's aired last month, but now it looks like what´s been dubbed iRadio won´t arrive until this summer, at the earliest.
Creating the technical side of this service isn´t the biggest challenge for Apple. They need to get the right agreements with record labels and publishing companies like EMI before they can make their first move. According to the New York Post, Apple is attempting to negotiate a deal with these industry execs, whereby they would pay about half of what Pandora pays for the same rights. Yet their $137 billion stockpile of cash does not yet appear to be helping them in these negotiations.
Pandora is currently paying the labels and publishing companies 12 cents per 100 tracks streamed. iHeartRadio, an offering backed by terrestrial radio, pays as much as 22 cents per 100 tracks. Subscription-based Spotify pays the most for these rights, shelling out 35 cents for every 100 songs.
“Apple wants a rate that is lower than Pandora´s,” said the unnamed source who spoke with the New York Post. “Everyone´s had their initial meetings and everyone is preparing counters.”
Though these executives are battling it out in conference rooms to find the right price, Rich Greenfield, media analyst with BTIG, told the Post such a deal could have an important effect on Apple and the industry.
“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,” explained Greenfield.
“Everyone´s trying to figure out a better structure. I wouldn´t say any of them are giving up.”
Apple may be having the most trouble in these talks with Sony/ATV. According to the Times, the publisher controls the EMI publishing catalog and was recently able to negotiate a 25 percent increase in royalties from Pandora. Last year, Apple could have simply side-stepped Sony and brokered deals with other publishing companies, such as ASCAP or BMI. However, Sony/ATV withdrew the relevant rights that allowed these companies to negotiate directly with Apple. Now, the iPhone maker must deal with Sony directly if they hope to land the kind of deal they want.
Last October, Bloomberg ran a story about such an Apple service entitled “Apple´s Online Radio Service to Challenge Pandora in 2013.” When this story first hit the Internet, Pandora´s stock plummeted by 21 percent and closed the day with an overall decline of 11.7 percent.