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Apple signs Sony to iRadio

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It seems like iRadio is headed to the four-day Apple Worldwide Developers Conference scheduled for June 10 after Apple reportedly inked a deal with the world’s biggest publisher.

Sources suggest that Sony/ATV Music, which includes EMI Music Publishing, has signed an agreement with Apple’s iRadio service. This is the third company to sign a deal with Apple.

In the past month Universal Music Group’s record music operation and both the recorded and publishing operations of the Warner Music Group signed up to license their music to the service.

Sony/ATV, the world’s largest publishing house, is jointly owned by Sony Corp. and the estate of Michael Jackson. Its chief, Martin Bandier, has been at odds with Apple throughout the past year of off-and-on negotiations, according to industry sources.

A group of investors, including Sony Corp., bought EMI’s music publishing business last year for $2.2 billion, and Bandier, a longtime music exec, made it a mission to get fatter royalty rates than what’s required by the performance rights organization, which includes ASCAP and BMI.

The majors publishers had looked like they were going to be the holdout because Apple initially offered to pay them a rate of 4.1% of its advertising revenue, while the publishers had been withdrawing digital rights from the U.S. performance rights organizations BMI and ASCAP because they wanted higher rates. BMG, Sony/ATV, UMPG and Warner/Chappell executives had privately said they were seeking rates of 10%-15% of iRadio’s advertising revenue. But when Apple agreed to a 10% rate, Warner/Chappell last week signed the deal and now so has Sony/ATV.

The holdup on Sony’s recorded side appeared to be over Apple’s proposal that it not pay if listeners skip a song from iRadio’s programming. (Pandora pays on skips.)

The proposed iTunes digital offering has been described as a hybrid, Pandora-like service that will allow users to build their own listening stations informed by whatever song or artist is chosen, plus each user’s iTunes buying history and iCloud account. But in another important distinction, it will also allow labels to pitch music that can fit in with user’s choices. Finally, iRadio will come with a “buy” button, which labels hope will spur iTunes sales.

The service will be ad-supported. Apple has proposed a pay model based on whichever is greater of two revenue buckets. For the advertising bucket, iTunes has proposed a 50/50 split after 10%-20% is deducted to cover the cost of bringing in advertising. In its per-play/per-listener bucket, Apple is proposing to pay slightly higher than the $0.0012 Copyright Royalty Board-determined statutory rate that Pandora pays. Depending on who you ask, Apple will pay $0.00125 or $0.0013 as part of its per-stream rate, which will also have an undisclosed percentage of advertising revenue sprinkled on top. Some press reports, however, put the per-stream rate at $0.0016.

Apple appears to be holding out for the advantage of not paying on skips, which one source says makes the rate that Apple will pay on a per-play basis smaller than the $0.0012 cents per play that Pandora pays as determined by the Copyright Royalty Board for its PurePlay license. However an executive adds that the advance money that Apple is offering—the amount of which Billboard was unable to determine—is substantial enough to mitigate this problem, and potentially makes the rate Apple pays higher than that of Pandora

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