Apple has been in talks with music labels about launching a streaming music service that would compete against services like Google Play Music All Access, Spotify, and Pandora. Apple wanted to roll out the streaming music service this summer, but some of the details that they are trying to figure out with Sony Music is how much Apple would pay for songs that people listen to for a short period of time and then skip, according to sources with CNET. There are also other issues in the negotiations.
Apple’s streaming music service reportedly will have the ability to rewind a song and skip to the next after listening to part of it. Last week Apple made an agreement with Universal Music Group and is finalizing a deal with Warner Music Group added CNET’s sources.
Executives at Universal Music and Warner Music are reportedly frustrated with Sony Music’s skipping issue because they see Apple’s free radio service as a major opportunity and want to help Apple get it launched. Apple’s service reportedly has two other streams of revenue, which is projected to generate more revenue than Pandora. This includes a way for users to purchase a song that they are listening to and advertising revenues through the company’s iAd services.
Apple’s approach to dealing with the music labels is different than what Pandora is doing. Apple is making direct deals with the labels rather than having terms set by federal statutes. The music labels dislike federal statutes because it makes them less money and limits Pandora’s ability to expand. Pandora is only available in the U.S., Australia, and New Zealand, but Apple has plans to roll out in at least 12 countries upon launching.
Pandora’s song-skipping limits are set under the 1996 Digital Millenium Copyright Act. Free Pandora accounts are allowed six skips per station per hour for up to 12 total skips per day across all of their stations. Pandora has to pay the full royalties for the song even if it plays just for a few seconds.
Sony Music wants better terms than what they are getting from Pandora. If Apple allows Sony to get better terms, then they would likely have to renegotiate with Warner Music and Universal Music. Apple has similar deals in place with labels and publishers in place already where rights holders are paid 70% of every dollar that it brings in. Sony Music head Doug Morris believes that in the past they have made bad deals with Apple so it is likely that they are not willing to concede on many issues.