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Lowball royalty offer from Apple holding up music streaming service - report

post #1 of 40
Thread Starter 
Record labels are reportedly dissatisfied with a "cheap" offer made by Apple to obtain the necessary rights for a planned music streaming service.

Apple's initial offer of about 6 cents per 100 songs streamed is half the 12 cents per 100 songs that the current streaming leader Pandora pays. The labels believe Apple should pay about 21 cents per 100 songs, which is the rate set by the Copyright Royalty Board for companies that don't own broadcast operations.

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In comparison, Spotify reportedly pays 36 cents for every 100 songs streamed, while iHeart, an online service which is backed by terrestrial radio stations, pays 22 cents per 100 tracks.

Reports first surfaced last September claiming that Apple was working on a streaming radio service that would rival current offerings like Pandora. Apple was said to be in talks with content owners to license music for a similar Internet-based radio service.

While Apple was reportedly pushing to launch its streaming radio service last year, the iPhone maker was allegedly held back by negotiations with content providers. Specifically, it was said that talks with Sony hit a "last-minute snag," according to earlier reports from New York Post.

Thursday's update suggests those negotiations continue to hit stumbling blocks, with content owners apparently balking at Apple's latest suggested royalty rate.

On the software side, there are signs that Apple's streaming service could be ready to go once the necessary content deals are secured. "Radio Buy" buttons were discovered last month in iOS 6.1, suggesting the underpinnings for such a service are at least partially in place in Apple's mobile operating system.
post #2 of 40
This doesn't surprise me in the least and its a basic rule of business, pay as little as possible so you can make as much as possible. Apple should know that they are not ruling the roost anymore and the music labels are not in a hurry to roll over and let them take it all.
post #3 of 40
Apple doesn't want to launch a service that is an eternal money loser from day one. Look what is happening to Pandora.

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post #4 of 40
Meanwhile, Sirius/XM pays much less. If the Internet Radio Fairness Act passes this year, then Apple will get low rates.
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post #5 of 40

I'm more than happy with iTunes Match at the moment. I prefer to actually own all of the songs that I have on my devices. If I stream anything, it'll be from my own library.

post #6 of 40
Quote:
Originally Posted by e1618978 View Post

Meanwhile, Sirius/XM pays much less. If the Internet Radio Fairness Act passes this year, then Apple will get low rates.

Maybe that's what they're waiting for?

post #7 of 40

This is how business negotiations work...they'll eventually hammer something out. The music business needs Apple more than the other way around. I've often wondered why Apple doesn't buy Sirus/XM or some other established service? It would give them a platform already in place.

post #8 of 40
Quote:
Originally Posted by jd_in_sb View Post

Apple doesn't want to launch a service that is an eternal money loser from day one. Look what is happening to Pandora.

 

Sure, but losing a bit of money, or hardly making any from the service lets them gain a significant chunk of the streaming music business, than it's a good trade. Considering how much money Apple makes the cost of this is negligible, and even a less than ideal deal is well worth getting their foot in the door. Unlike other companies that need to survive solely on their streaming music business, Apple certainly doesn't. The potential profits of such an endeavor are a drop in the ocean for them, and anything that increases the value of Apple products/services is worthwhile. Apple can afford to undersell everyone on this. 

post #9 of 40

And musicians are already complaining about Spotify's rates...

post #10 of 40

Why not buySirius/XM? Besides music, it gives Apple access to talk radio, sports, special events, etc... They could modify the Sirius/XM app to allow you to purchase a song you hear on the radio directly from iTunes...and it gives Apple a great starting point to be able to work into integrating Apple technology into the automobile industry too...almost every car made these days has a satellite radio. Sirius has a market cap of around $20 billion...Apple has plenty of cash for that purchase...and SIRI stock is currently trading at yearly highs...could be a good fit for Apple.

post #11 of 40
Originally Posted by RaptorOO7 View Post
Apple should know that they are not ruling the roost anymore…

 

Uh, what?

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post #12 of 40
Fortunately my LP and CD collections are already quite large. I have paid enough for music and I am not about to allow the content providers extort me for more. If I listened to three or four hours of music a day it would probably take me five yeats or so to go through my collection. And that is the advantage of owning your collection.

I do still occasionally DL music but 99% of that comes courtesy of a site where I have a lifetime membership. They don't have many artists most people would recognize but they do have some fantastic artists and the sign up more aspiring groups all the time. All music is available in wav format and a number of the albums I have downloaded are also now available for purchase on iTunes and others.
post #13 of 40
Quote:
Originally Posted by Jordon Eagan View Post

Why not buySirius/XM? Besides music, it gives Apple access to talk radio, sports, special events, etc... They could modify the Sirius/XM app to allow you to purchase a song you hear on the radio directly from iTunes...and it gives Apple a great starting point to be able to work into integrating Apple technology into the automobile industry too...almost every car made these days has a satellite radio. Sirius has a market cap of around $20 billion...Apple has plenty of cash for that purchase...and SIRI stock is currently trading at yearly highs...could be a good fit for Apple.

you can't customize sirius/xm like you can spotify/slacker/pandora. and talk radio you need stars like Howard Stern and lots of money to pay them

 

spotify is the current standard for streaming music

post #14 of 40
I'm amazed by the wide range of fees - from 12 cents to 36 cents - charged to other companies and the high offer of 21 cents that the music companies are asking from Apple. I don't see how they can justify charging Apple more than Pandora.
post #15 of 40
Quote:
Originally Posted by Jordon Eagan View Post

Why not buySirius/XM? Besides music, it gives Apple access to talk radio, sports, special events, etc... They could modify the Sirius/XM app to allow you to purchase a song you hear on the radio directly from iTunes...and it gives Apple a great starting point to be able to work into integrating Apple technology into the automobile industry too...almost every car made these days has a satellite radio. Sirius has a market cap of around $20 billion...Apple has plenty of cash for that purchase...and SIRI stock is currently trading at yearly highs...could be a good fit for Apple.

It's highly doubtful Apple would be able to simply take over the contracts with record companies of any company it buys out. I'm sure those deals allow for renegotiations if the companies are bought.

post #16 of 40
Quote:
Originally Posted by Slurpy View Post

 

Sure, but losing a bit of money, or hardly making any from the service lets them gain a significant chunk of the streaming music business, than it's a good trade. Considering how much money Apple makes the cost of this is negligible, and even a less than ideal deal is well worth getting their foot in the door. Unlike other companies that need to survive solely on their streaming music business, Apple certainly doesn't. The potential profits of such an endeavor are a drop in the ocean for them, and anything that increases the value of Apple products/services is worthwhile. Apple can afford to undersell everyone on this. 


I don't think it is in Apple's DNA to make something that loses money, even if it gives them market share and even if they have $140 billion in the bank.

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post #17 of 40

Al...it's true that Spotify and Pandora are tops in music, but Sirius/XM has millions of listeners who are also into talk, comedy and sports too. I think the Sirus app could be modified to allow for purchasing a song directly fromiTunes, but also you could buy a sports pass to download your favorites sports shows from the NFL, MLB, NBA and Hockey, etc... Or Howard Stern, Sean Hannity, etc... from the talk side. And one of the biggest things this would give Apple is a footprint into people's cars, where they could increase their mobile presence into people's busy lifestyles. I have been a Sirius subscriber for many years and I always listen in my car or office via my iPad...I think Apple may want to take a look at what they could do with this platform.

post #18 of 40

In contrast there was a report out a couple days back that Google has already begun closing deals with the record labels for a streaming music service of their own. Warner was reportedly the first to ink an agreement for a service to begin later this year. 

 

I'm not convinced the Apple rumor is accurate as I can't imagine Google able to sign up providers but Apple being the cheap one.

 

http://www.billboard.com/biz/articles/1550631/warner-music-inks-deal-with-google-for-music-subscription-services


Edited by Gatorguy - 3/7/13 at 10:49am
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post #19 of 40
Quote:
Originally Posted by Jordon Eagan View Post

Al...it's true that Spotify and Pandora are tops in music, but Sirius/XM has millions of listeners who are also into talk, comedy and sports too. I think the Sirus app could be modified to allow for purchasing a song directly fromiTunes, but also you could buy a sports pass to download your favorites sports shows from the NFL, MLB, NBA and Hockey, etc... Or Howard Stern, Sean Hannity, etc... from the talk side. And one of the biggest things this would give Apple is a footprint into people's cars, where they could increase their mobile presence into people's busy lifestyles. I have been a Sirius subscriber for many years and I always listen in my car or office via my iPad...I think Apple may want to take a look at what they could do with this platform.

the ESPN app offers free access to sports talk shows on the radio

 

MLB offers free radio streaming of games as well

post #20 of 40
Quote:
Originally Posted by AppleInsider View Post

Record labels are reportedly dissatisfied with a "cheap" offer made by Apple to obtain the necessary rights for a planned music streaming service.

Apple's initial offer of about 6 cents per 100 songs streamed is half the 12 cents per 100 songs that the current streaming leader Pandora pays. The labels believe Apple should pay about 21 cents per 100 songs, which is the rate set by the Copyright Royalty Board for companies that don't own broadcast operations.

So why should Apple pay more than Pandora?

In fact, given the massive increase that this would allow for the market, Apple should definitely be paying less than Pandora. So, while $0.06 might be on the low side, it's a lot more reasonable than $0.21.

Besides, Sirius is paying 10% of gross streaming revenues. Apple could agree to pay twice the percentage that Sirius pays. 20% of nothing is still nothing. The copyright owners ought to be happier with $0.06 per 100.

Isn't this what all the music companies said when Apple came out with iTunes, anyway? Yet iTunes probably saved the industry.
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post #21 of 40
Quote:
Originally Posted by al_bundy View Post

you can't customize sirius/xm like you can spotify/slacker/pandora. and talk radio you need stars like Howard Stern and lots of money to pay them

Who says you need Howard Stern? Apple could buy Sirius and dump the hate channels like Stern's and still come out ahead.
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post #22 of 40

Apple's advantage is one of scale. They would bring so many new users to the streaming model they want lower rates. In the end they will probably bring in lots more cash from streaming than from sales. My kids do buy music but it doesn't add up to 8 bucks per month. Their music habits are fickle - their favourites don't stay favourites for long. They listen via YouTube half the time it seems. 

post #23 of 40
Quote:
Originally Posted by jragosta View Post


Who says you need Howard Stern? Apple could buy Sirius and dump the hate channels like Stern's and still come out ahead.

howard is what keep the money flowing

 

without howard there would be no point in paying for something you can get for free

post #24 of 40
Quote:
Originally Posted by paxman View Post

Apple's advantage is one of scale. They would bring so many new users to the streaming model they want lower rates. In the end they will probably bring in lots more cash from streaming than from sales. My kids do buy music but it doesn't add up to 8 bucks per month. Their music habits are fickle - their favourites don't stay favourites for long. They listen via YouTube half the time it seems. 

So lose money and make it up in volume?
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post #25 of 40
Sad, it seems that everything Apple does these days is tantamount to shooting itself in the foot - over and over again! And who pays the price - the investors! But as Cook has said on a number of occasions (paraphrasing), We don't look at the stock price (yeah, right!), we just concentrate on making the best user experience for our customers. After 25 years of all Apple, I am losing my patience with the ineptitude with which they seem to be carrying on after SJ's death.
post #26 of 40
Originally Posted by thinkman@chartermi.net View Post
We don't look at the stock price (yeah, right!)…

 

Why are you contesting this? It plays right into your fallacious argument in the first place.


…we just concentrate on making the best user experience for our customers.

 

You should have put the "(yeah, right!)" after this part. It makes more sense from a trolling standpoint.


I am losing my patience with the ineptitude with which they seem to be carrying on after SJ's death.

 

Then sell and forget about Apple entirely. If you're too blind to what they're actually doing, I'm sure they don't care that you'll leave.

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post #27 of 40
Quote:
Originally Posted by thinkman@chartermi.net View Post

Sad, it seems that everything Apple does these days is tantamount to shooting itself in the foot - over and over again! And who pays the price - the investors! But as Cook has said on a number of occasions (paraphrasing), We don't look at the stock price (yeah, right!), we just concentrate on making the best user experience for our customers. After 25 years of all Apple, I am losing my patience with the ineptitude with which they seem to be carrying on after SJ's death.

I would say that the true investors are the people that routinely buy Apple products and services. They are the ones that have taken the company to where it is and not the stockholders.
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post #28 of 40
Quote:
Originally Posted by al_bundy View Post

howard is what keep the money flowing

without howard there would be no point in paying for something you can get for free

Maybe for you.

OTOH, I don't have any local stations that play the endless variety of music or comedy available on XM - without commercials. If I listened to sports, it would be an even bigger advantage for XM.

In the real world, Stern only accounts for a tiny fraction of XM listeners:
http://news.cnet.com/8301-13645_3-10262493-47.html
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post #29 of 40
Quote:
Originally Posted by jragosta View Post


Isn't this what all the music companies said when Apple came out with iTunes, anyway? Yet iTunes probably saved the industry.

 

It seems the record companies have short memories of just what an impact Apple has had. Or how much money they're getting from "pirates" who decided to pop $25 a year for iTunes Match to upgrade all their "legally obtained" music.

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post #30 of 40
Quote:
Originally Posted by jragosta View Post

So why should Apple pay more than Pandora?

Why should they pay less? Apple got it's way with iTunes because they were setting a market. They're late to the streaming market and want better deals than the current players. People aren't fond of getting screwed over twice.
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post #31 of 40
Quote:
Originally Posted by jd_in_sb View Post

Apple doesn't want to launch a service that is an eternal money loser from day one. Look what is happening to Pandora.

Except that it's different.  If a listener ends up buying a song through the streaming service (which is the only method of generating revenue these two might have in common), Pandora will send you to the iTunes store to buy the song, where Apple takes their cut, and then the label turns around and pays Pandora a percentage.  Apple could in theory use the revenue from Pandora-sourced purchases (and other similar services) to subsidize the cost of their streaming service, which strengthens the iTunes store.

 

The other difference is that Apple can negotiate from a position of strength being the top music retailer, where Pandora is more beholden to the labels because they don't "sell" anything, per se.  Put it this way, Apple NOT having a streaming service isn't hurting them.

post #32 of 40
Quote:
Originally Posted by dasanman69 View Post


So lose money and make it up in volume?

Who'd be loosing money if Apple gets a better deal than the competition? The only way they'll get a better deal is because they have a massive user base and as such write larger cheques than anybody. The calculation is more complicated, obviously but I imagine that is what Apple is gunning for - a deal based on volume.

post #33 of 40
Quote:
Originally Posted by paxman View Post

Who'd be loosing money if Apple gets a better deal than the competition? The only way they'll get a better deal is because they have a massive user base and as such write larger cheques than anybody. The calculation is more complicated, obviously but I imagine that is what Apple is gunning for - a deal based on volume.

The music industry of course, but I forget that many here believe that only Apple should make money. Pandora can be used across different platforms so they have a much bigger user base than Apple.
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post #34 of 40

So how were they screwed the first time?  Apple actually showed them how to do it right AND made them money.  Pirating was what was screwing them.

post #35 of 40
Quote:
Originally Posted by dasanman69 View Post

Why should they pay less? Apple got it's way with iTunes because they were setting a market. They're late to the streaming market and want better deals than the current players. People aren't fond of getting screwed over twice.

Volume. Apple would immediately bring more users than Pandora could possibly dream of.

Not to mention, of course, that Apple users have more money to spend than their competitors' customers in most cases.
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post #36 of 40
Quote:
Originally Posted by jragosta View Post

Volume. Apple would immediately bring more users than Pandora could possibly dream of.

But what if those users stop paying for songs off iTunes (99c per song) and start streaming instead (0.06c per play)? The music industry only offers such low rates to Apple's competitors to counteract iTunes' dominance.
post #37 of 40
Quote:
Originally Posted by jragosta View Post

Volume. Apple would immediately bring more users than Pandora could possibly dream of.

Not to mention, of course, that Apple users have more money to spend than their competitors' customers in most cases.

How if every iOS user, every Android user, every Windows user, etc can use Pandora?
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post #38 of 40

Apple's problems with settling licensing for a streaming music service still wasn't enough to keep Pandora's CEO in the saddle. Record revenues but record losses too led to his resignation today.

http://www.theverge.com/2013/3/7/4076582/pandora-ceo-to-resign-following-tough-quarterly-loss

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post #39 of 40
I bet all the existing Online streaming revenue added together wouldn't even come close to one tenth of Apple's would be generated revenue at even 6 cents per 100 tracks.

You need HUGE scale for streaming to work. As have been reported earlier the current money flowing from streaming services to artist are dismal.

This would also help to stop the rampant music pirates. Which is good for the industry.

I just hope Apple strike a good deal.
post #40 of 40

With so much choice available for streaming music (Xbox Music, Pandora, Spotify, etc), why would anyone take such a deal? Any new customers that this new service would bring, would just be existing customers from those other services, there would be no real net gain in consumers.

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