We know how we feel about an Apple streaming music option, and we’re sure you have likely formed an opinion or two yourself. Will we ditch our chosen streaming option for Apple’s? Time will tell, as the service is believed to come to fruition at WWDC this year. Perhaps even more curious is the business side of all this, where Apple is coaxing record labels to let them stream music, and other services are already feeling the pinch. To that, Pandora CFO Mike Herring made some interesting comments about Apple recently.
When asked about his company’s relationship with Apple, Herring called them a “frenemy” (mix of ‘friend’ and ‘enemy’, in case you’ve never heard the term). Herring went on to say “we were part of what made it fun to have an iPhone”, and that the two entities are “close partners” with a “very interesting relationship”.
It’s worth revisiting that Apple is widely believed to be readying some kind of streaming service — nobody outside their walls knows anything for certain. With declining iTunes revenues and streaming now the way we choose to consume music, Apple is well behind the curve.
So what’s the rub? Royalties and users. Pandora pays about $0.0014 per song played in royalty fees. Herring says if that rate were to increase, remaining profitable would be harder.
Apple is currently rumored to be hashing out new streaming arrangements with record labels. Some of the chatter points to Apple paying a higher royalty fee than what is average to coax labels onto their incoming streaming platform.
Users jumping ship is another concern. At current subscriber numbers with the royalties attached to streamed tracks, Pandora (and others) can remain profitable. If Apple meets their price-point and bumps royalty fees up, that spells trouble for Pandora, among others. They’d have to (eventually, once the current agreements subside) pony up more cash to record labels while potentially losing millions of customers.
Hopefully, we get to see if Apple’s streaming service is competitive at WWDC this year.
Source: Fox News