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Report: Apple close to deal on alleged 'iRadio' streaming service

updated 05:00 am EDT, Fri April 5, 2013

Finds workaround for obstacles with two major record labels

Late on Thursday, unnamed sources from "people familiar with the negotiations" said that Apple has come up with a clever workaround to the major obstacles preventing it from concluding a licensing deal for its alleged "iRadio" streaming service. The breakthrough is said to have been sufficient to get two of the three major record companies on board for the yet-to-be-announced feature, and relies on letting Apple get the streaming royalty rate it wanted -- far lower than comparable services -- in exchange for creating ways for labels to make up the cost difference.

Warner Music and Universal Music Group could sign contracts with Apple as early as next week, CNet reports. According to sources, the alternative revenue streams could actually prove more lucrative to the labels than the higher streaming royalty rate the industry wanted. Details are unclear, but suggest that Apple will both offer an easy way for buyers to instantly purchase songs they hear on the streaming service, as well as possible share some of the revenue of alleged audio ads the company will add to the streaming service.

Apple may feel justified in obtaining a lower streaming rate than others because of the considerable additional benefits it brings to the table. Unlike 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 instantly.

The presence of audio ads, if true, suggests that Apple with either not charge for the service at all, or will offer at least two tiers of service -- with one of them being ad-supported. Being able to easily purchase songs either directly from the stream or from ads should boost download sales. The Pandora-like "iRadio" is said to be offering a curated music stream that draws from established "likes" through its analysis of the contents of users' existing iTunes libraries, with an emphasis on discovery of related artists. Allegedly, the service will offer some features Pandora doesn't have, such as the ability to restart a streamed song.

While Apple has kept mum on any plans for 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.

Apple has been working on implementing the streaming service for months at least, but hit a major roadblock when labels pushed back against the iPhone maker's proposed streaming royalty rate: Apple wanted to pay six cents per 100 songs streamed, about half of the lowest comparable rate in the industry -- paid by Pandora. Record companies wanted Apple to follow the royalty guideline set by the federal Copyright Royalty Board for non-broadcast Internet streaming, which would have established a 21 cents-per-100-streams rate.

According to the report, Apple is still pushing to launch the service sometime during the summer. It also warns that the alleged deal is very tentative at this point and could still fall through.

By Electronista Staff
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