Apple, Universal Music, and other record labels are getting closer to reaching a deal for Apple to roll out its free Internet radio service. Apple began talking with record labels about getting rights for a music-streaming service and came in with an offer to pay 6 cents per 100 songs streamed (as a comparison Pandora pays 12 cents, iHeart pays 22 cents and Spotify pays 35 cents). After negotiations, the labels and Apple have apparently finally settled on a per-stream rate that will be the same as Pandora or higher.
Why the big fight for Apple to pay a higher per-stream rate? Labels are afraid that Apple might roll out it’s iRadio with little to no advertising, which would mean that the per-stream revenue is the only money that the labels receive. If Apple builds in audio ads, however, rights holders would also get about 50 percent of the ad revenue. This fear may be justified as Apple has not yet built an iAd infrastructure, and thanks to their enormous pile of cash (around $137 billion) this revenue stream may not be an integral part of their initial roll out of this service.
iRadio would be tied to iTunes and designed for mobile devices. It is rumored to contain features that allow you to rewind a song as well as the ability to purchase a song, which might be appealing to the labels who would collect about 70 percent of every dollar from an iTunes purchase.
Currently there are 500 million iTunes accounts (compared to “only” 70 million Pandora accounts), which puts Apple in a position to gain a large customer base very quickly. There is increasing competition in this growing market, though. Google is aiming to launch its own radio-type product that will work on desktops and mobile devices this summer.
We could potentially hear some more information about this during WWDC in June. What do you think? Would you give up listening to Pandora, Spotify and other Internet based radio services and use Apple’s version instead?