As Apple continues to ramp up development on its new music streaming service, negotiations with record labels haven’t been going well.
Apple’s music streaming service is rumored to be similar to Pandora’s radio service, but rather than settling with the same royalty rate that Pandora enjoys, Apple is trying to lowball record labels into giving them a better deal.
According to sources at the New York Post, Apple’s initial offer to the record labels is to pay 6 cents per 100 songs streamed. That’s half of the 12 cents per 100 songs that Pandora pays.
Rich Greenfield, media analyst with BTIG, told The 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.”
Music label insiders suggest that Apple will need to pay at least 21 cents per 100 songs to strike a deal for iRadio. While the 21 cents per 100 songs royalty rate seems high, other services like Spotify pay 35 cents per 100 songs.
Apple is expected to supplement the cost of iRadio with iAds so it remains a free service. Apple’s chief negotiator for the iRadio deal has been Eddy Cue, who has received a lot of pushback from record label execs. The service was supposed to launch alongside the iPhone in 2012, but stalled negotiations have pushed back the release date indefinitely.
Source: NY Post