Apple is reportedly gearing up to launch its own web-based music streaming service, and one that will rival Pandora. The new music service will be called iRadio, and will follow Pandora’s example of music streaming. Music services like Spotify and Pandora provide a great revenue stream for music labels. According to the labels, Pandora accounted for 25% of their revenue last year.
However, the labels are getting worried because Pandora is attempting to negotiate for lower royalty fees. Currently, it pays 12 cents per 100 songs, but it needs to have a lower rate in order to generate a profit. Despite it not generating a profit, Pandora’s 12 cents per 100 songs fee is much lower than the 21 cents per 100 songs recommendation provided by the Copyright Royalty Board. Even Spotify, with its millions of users, is paying 35 cents per 100 songs.
The labels aren’t planning on lowering Pandora’s royalty fees however. They believe that the web radio industry is still growing, and that there will be other services that will be just as good as Pandora. They’re banking on Apple’s iRadio becoming a success. A source told The Verge that there is no doubt that Apple’s iRadio is coming, and that Apple has achieved a lot of progress with music labels. The sources say, “Apple is pushing really hard for a summertime launch”.
If Apple really is far into negotiations with music labels, perhaps the music labels were able to convince the company that a 6 cents per 100 songs royalty fee was too low. Regardless, with Apple’s power, its iRadio service would most likely be an instant hit, and it may deal incredible damage to Pandora’s business, especially since Pandora has just restricted its mobile users to only 40 hours of free music streaming per month. If the music labels offer Apple a better rate than Pandora, Pandora is expected to make a case in front of Congress with the Internet Radio Fairness Act (IRFA) bill. The bill, if approved by Congress, would lower Pandora’s (and other web radio’s) royalty fees so that they can generate a profit.
[via The Verge]