updated 10:00 pm EDT, Thu April 11, 2013
Warner Music said to be close behind, Sony in early stages
Should Apple actually succeed with its alleged plan to start up a Pandora-style streaming radio service, one of the biggest obstacles the company faced may be behind it as early as next week, if a report on The Verge is true. Multiple sources say that Apple and Universal Music Group, one of the "big three" music labels, have reached an agreement on streaming royalties -- and that the company is in the final stages of also closing a deal with Warner Music. The third major label, Sony, is an earlier stage of the process.
Rumors of Apple's streaming service have circulated for months, though few details of exactly how it would work have been made clear. It isn't even known if the service will simply be an expanded service of iTunes or a separate, subscription-based service; will offer a large streaming library like Spotify or an algorithm-curated selection of songs based on the user's tastes, like Pandora; an alternate front-end to iTunes buying, or a revolution in the largely-staid and financially-strapped Internet radio industry. Despite this, the service -- called 'iRadio' by the media -- is highly likely to change the landscape of the industry, and may become more than just another way to buy music easily and digitally.
According to the report, Apple's initial low-ball offer on royalties -- said to be about half of what Pandora, widely thought to be one of the best deals in the industry, pays -- was not accepted, and now the iPhone maker has agreed to pay a rate much closer to the Pandora deal. Royalties deals for Internet-only "stations" like Pandora have been a crippling factor in the industry, with most major services struggling to attain profitability. Apple, with its 400 million accounts (most with credit cards attached) and complete musical eco-system that can sell songs and albums, may have the key to making Internet-only radio streaming a viable business that benefits artists, record companies and consumers.