updated 08:00 pm EDT, Fri March 29, 2013
Service would offer streaming, customized music, buy buttons
Music industry executives are evidently not good at keeping secrets -- a number of them have gone on the record talking about Apple's proposed streaming "radio-like" service, currently dubbed "iRadio," and some details behind it. Following an apparent breakthrough in negotiations with Universal and Warner, the company is pushing to get the service launched sometime this summer, according to reports. Likely to be incorporated or at least tied to the iTunes Store, "iRadio's" main sticking point so far has been royalty rates.
The fundamental problem is that rates are not consistent around the industry. The largest service for streaming music, Pandora, pays about 12 cents for every 100 streaming songs. However, the fast-growing service Spotify pays about 36 cents per 100 songs -- while broadcasters who also stream online pay about 21 cents. Rumors had said that Apple initially low-balled its proposed rate even below Pandora, but details on what rate the company ended up getting has not been revealed, says The Verge.
Apple may feel justified in getting a lower rate than others because of the considerable additional benefits it brings to the table. Unlike most of its competitors, Apple has more than 400 million accounts with credit cards on file, the largest music catalog available anywhere, an enormous base of daily users, a complete mobile and desktop ecosystem, and the commerce infrastructure to easily allow listeners to buy songs they hear and like. Should the company launch a service of the same quality as Pandora or Spotify, it would likely become the industry leader almost overnight -- and has a consistent and proven track record of enriching the music companies and artists who use its service.
Details of how the service would work are scarce, still. Rumors have spoken of a "curated" premium radio service along the lines of Radio Paradise or SomaFM that showcased promoted acts, or an analysis-based service that would deliver new artists similar to those in the listener's iTunes library (an approach that would offer results similar to what Pandora offers). Another option for the company is to offer listeners the keys to the entire iTunes inventory in streaming form -- a more extensive version of Spotify or Rdio. While Apple has maintained radio silence on the alleged "iRadio," it has been known to have spoken to music industry executives about the idea and consulted with subscription-radio advocates such as Beats headphone CEO and record company head Jimmy Iovine.
Unused "Radio Buy" buttons were also discovered in the iOS 6.1 update, further lending credibility to the idea that iTunes or perhaps a separate app tied to the iTunes Store would offer streaming music listeners the chance to buy a song they heard. Apple has recently been on a bent to increase the "discovery" abilities of its various stores, buying app-discovery service Chomp last year and incorporating its technology into the store, along with "others bought" and "similar artists" recommendations in the music and video sections.
Still unanswered is whether the service will be offered for free or will be a paid-for premium service, like iTunes Match. The latter, a $25 per year "virtual locker" for music that stores large collections and allows them to be re-downloaded on demand (effectively giving mobile device owners access to their entire music libraries beyond the limited capacity of their devices) has proven unexpectedly popular. Apple pays a fee every time a song is streamed from the service, which has proven to be a windfall for record companies and particularly independent and smaller labels. The streaming radio service, if it comes together, may be a extension of that idea.
Last year SoundExchange, the agency that collects royalties from web and satellite radio, reported its revenue had risen 58 percent. All together, the various subscription services generate about $1 billion in revenue for the music companies, but thus far none have managed to reach profitability. Both Pandora and Spotify have said point-blank they cannot continue indefinitely without a serious reduction in streaming music fees, however the record companies -- smarting from lower CD sales -- are intent on milking the new cash cow for all its worth.
As with the book, digital video and music industries, it may take a player with the clout of Apple to find the balance between a fair price for the music providers and a profitability for the web radio industry. Should Apple be able to get a better deal than Pandora presently has, it would present a powerful argument for other streaming providers to pressure labels for a lower rate in the name of preventing an Apple monopoly, a case the record companies might be willing to invest in.