Apple Closing In On Music Deals For iRadio

Apple may be closer to launching “iRadio.”  The company is pushing to close licensing deals with major music companies before it plans to announce its new streaming music service for iTunes, which could be launched as early as next week, according to the New York Times, which cited people briefed on the talks.

“iRadio,” as many have coined it, would compete with Pandora and feature music tailored to the listener’s tastes.  However, record companies are demanding higher royalties and guaranteed minimum payments, which may hinder Apple’s plans to unveil the service at its annual developers conference, which begins June 10 in San Francisco, the paper said.

So far, Apple has signed licensing deal with Warner Music Group for the rights to both its recorded music and music publishing.  Under the deal, Apple will pay Warner Music’s publishing arm 10 percent of ad revenue, more than twice what Pandora pays, the Wall Street Journal reported.  Apple, which has also inked a deal with Universal Music Group for its recorded music rights but not for music publishing rights (the part of the business that deals with songwriting), is hoping this will pave the way for other major publishing deals to follow.

Apple is reportedly still in talks with Sony Music Entertainment and Sony’s separate publishing arm, Sony/ATV, whose songwriters include Taylor Swift and Lady Gaga.  Apple is unlikely to launch the product without striking these deals, the Wall Street Journal reported.

The free internet radio model has not been a profitable one for Pandora.  The company has been struggling to post a profit as royalty fees eat up much of the company’s revenues.   Pandora, which has continued to attract more users, has been trying to gain leverage on music labels and drive royalty costs down by imposing limits on free listening hours.  Investors are concerned that this may drive away listeners.  Competitor Spotify, on the other hand, offers unlimited free listening with ads.

However, music companies see promise in Apple’s service since it can be linked to sales through Apple’s iTunes store, but want higher rates.  Apple plans to further monetize the service by allowing users to stream songs and be integrated with Apple iAd service, which allows developers to show ads within their apps, the Wall Street Journal reported.

Shares of Pandora are sharply lower in mid-day trading, down more than 10 percent, on concern a music-streaming service from Apple will hurt the company.