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Universal has licensed iRadio, says FT

By | Published on Friday 10 May 2013


Apple has secured a licensing deal with Universal Music for its long rumoured streaming service, usually dubbed iRadio, or so says the Financial Times. But the other mega-major, Sony Music, is still holding out for a better deal.

According to the paper, Apple increased its royalty offer to approximately 0.125 cents per stream, which is pretty much what services like Pandora pay the record companies via the US-based SoundExchange rights agency, the rates for which are set by Congress.

Apple had originally been pushing for lower rates, reportedly around 0.08 cents per stream, while promising an additional cut of ad revenue and stressing that, by being integrated with the existing iTunes Store, this new streaming service would also promote download sales.

The majors have been reluctant to offer Apple preferential rates, not least because the labels are currently fighting moves by Pandora in Washington to have SoundExchange’s streaming rates cut (to something closer to what satellite radio service SiriusXM pays), and it would be tricky to continue that battle while simultaneously offering what could become Pandora’s biggest rival a much better deal.

It’s not actually clear if Universal settled for the 0.125 cents rate, though Sony Music is reportedly pushing for more. Of course in the US Apple could always give up direct licensing negotiations and go the SoundExchange route, though presumably it is looking for global deals in its negotiations.

All this comparison to Pandora’s rates seemingly confirms that the iRadio service will be of the personalised radio model, rather than the fully on-demand Spotify model, where per-stream rates are usually higher.

If the FT report is right, Apple is seemingly making quite a financial commitment to enter the increasingly crowded streaming music market. Given there has been no talk of this being a subscription set-up, presumably the IT giant hopes its existing ad sales platform will help it quickly generate the required level of ad revenues, an achievement that has, in the main, eluded many of their ad-funded streaming competitors.

Even if the Universal deal is in place, Apple would definitely need Sony Music on board before being able to launch, and ideally Warner and the big indies too. Though usually once one big player does the deal, the rest soon follow. Even Warner. Eventually.