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

Posted:
in iPod + iTunes + AppleTV edited January 2014
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.
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Comments

  • Reply 1 of 39
    raptoroo7raptoroo7 Posts: 138member
    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.
  • Reply 2 of 39
    jd_in_sbjd_in_sb Posts: 1,493member
    Apple doesn't want to launch a service that is an eternal money loser from day one. Look what is happening to Pandora.
  • Reply 3 of 39
    e1618978e1618978 Posts: 6,075member
    Meanwhile, Sirius/XM pays much less. If the Internet Radio Fairness Act passes this year, then Apple will get low rates.
  • Reply 4 of 39
    apple ][apple ][ Posts: 8,698member


    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.

  • Reply 5 of 39
    19831983 Posts: 1,192member

    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?

  • Reply 6 of 39


    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.

  • Reply 7 of 39
    slurpyslurpy Posts: 5,179member

    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. 

  • Reply 8 of 39
    richlrichl Posts: 2,213member


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

  • Reply 9 of 39


    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.

  • Reply 10 of 39
    tallest skiltallest skil Posts: 43,399member


    Originally Posted by RaptorOO7 View Post

    Apple should know that they are not ruling the roost anymore…


     


    Uh, what?

  • Reply 11 of 39
    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.
  • Reply 12 of 39
    al_bundyal_bundy Posts: 1,525member

    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

  • Reply 13 of 39
    bryandbryand Posts: 78member
    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.
  • Reply 14 of 39

    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.

  • Reply 15 of 39
    jd_in_sbjd_in_sb Posts: 1,493member

    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.

  • Reply 16 of 39


    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.

  • Reply 17 of 39
    gatorguygatorguy Posts: 21,117member


    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

  • Reply 18 of 39
    al_bundyal_bundy Posts: 1,525member

    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

  • Reply 19 of 39
    jragostajragosta Posts: 10,473member
    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 <a href="http://www.nypost.com/p/news/business/stingy_to_the_core_8xxC6TNFQM5l8WqIIkbAvN">initial offer</a> 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.
  • Reply 20 of 39
    jragostajragosta Posts: 10,473member
    al_bundy wrote: »
    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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