RAIN 10/26: Apple Net radio could launch in early 2013, says Bloomberg

Paul Maloney
October 26, 2012 - 1:35pm

Bloomberg News reported late yesterday that Apple's rumored negotiations with record labels (first reported in RAIN here) "have intensified," and that negotiators could reach a settlement by the middle of next month. That would pave the way for Apple's own ad-supported Internet radio service to launch in early 2013.

Early last month, The New York Times and The Wall Street Journal broke the story that Apple had been in talks with major record labels for its own webcast service. Following the publication of the Bloomberg story, Pandora's stock price fell 12%, to an all-time low of $7.97 this morning, valuing the company at about $1.3 billion.

The negotiations reportedly involve record labels getting a share of advertising revenues and inventory. "In addition to an upfront fee, record companies are seeking a percentage of ad sales and the ability to insert their own commercials for artists," Bloomberg reports.

In exchange for sharing ad income and space, Apple would presumably be allowed to stream music without the same constraints with which other webcasters do (the technical term for these constraints is the "sound performance complement" of the Digital Millennium Copyright Act). Apple "wants listeners to be able to buy tracks as music streams or revisit what they’ve heard in auto-generated playlists."

"If Apple offers a radio product, it will be far superior to anything else on the market," Rich Greenfield, a New York analyst with BTIG, told Bloomberg. "They’re seeking direct licenses to avoid all the restrictions that come with a compulsory license." 

The story also reported that Apple's Internet radio service would be mobile-focused, "tailored for its iPhone, iPad and iPod Touch" devices. In other words, if sources are correct, the service won’t be focused on delivering music through a Web browser.

Bloomberg attributes all of these details to "people with knowledge of the talks."

Read Bloomberg News here.

Paul Maloney
October 26, 2012 - 1:35pm

Two noted technology writers today consider the likelihood of Apple launching an Internet radio service, and challenge the notion that it would mean death to competitors like Pandora.

Peter Kafka writes for All Things D, the tech blog of The Wall Street Journal. He suggests that because Apple can create great devices doesn't mean it'll be a slam-dunk for it to own the ad-supported Internet radio space.

"Selling Internet ads turns out to be a difficult, labor-intensive process — maybe even more so for Internet radio ads, which require lots of face time with local buyers," Kafka reminds us. "Pandora has been plodding away at this for years, with some success. But it seems hard to imagine Apple spending the same kind of effort."

Bloomberg's sources report that record labels want a cut of that ad revenue, and even some of the ad inventory itself to promote their artists (read more in our original coverage here). But Greg Sandoval at CNet spoke with other unnamed sources that say the labels aren't yet satisfied with what Apple's offering, which makes an Apple "iRadio" launch (that's the shorthand we've been seeing) anything but a done deal.

"Some decision makers at the big record companies want Apple to sweeten the offer," as Sandoval paraphrases the "music executives" with whom he spoke. "CNET's sources say that some of the sector's leaders don't believe the cut Apple put on the table is big enough."

Part of the problem may be that Apple expects not only relaxed restrictions on how it can use the music (see "sound performance complement" note in our Bloomberg coverage here), but also wants a discount on royalties.

"Sources said Apple has offered to pay a lower royalty rate than Pandora pays even though it wants to provide iTunes users with the ability to do more with the music than Pandora's customers enjoy," wrote Sandoval.

And even if Apple were to launch its own streaming radio, Kafka thinks keeping it within the Apple-verse leaves ample listening opportunities on other platforms for Pandora.

"It’s unlikely that (Apple's) going to make that one available for Android users. Which means Pandora will still have plenty of room to play."

Read Kafka in All Things D here and Sandoval in CNet here.

An interesting footnote: Regarding yesterday's news of the official launch of the Internet Radio Fairness Coalition to support the Internet Radio Fairness Act, Sandoval in CNet says "CNET has learned that the top record companies plan to quietly gather next week to discuss their strategy for fighting the legislation. In addition to the representatives from the top three labels, invitations were sent this week to some of the music industry's top music managers."

Paul Maloney
October 26, 2012 - 1:40pm

Both of Internet radio's leading stream aggregation services, TuneIn and iHeartRadio, have created specially-designed apps for Microsoft's brand new Windows 8 operating system.

Kristin George, Director of Product, TuneIn noted, "Not only did Windows 8 give us the canvas to create a beautiful interface that works with keyboard, mouse, and touch, but it also helped us showcase how TuneIn can easily deliver listeners’ favorite stations by providing the ability to pin them directly to their Start screen."

"iHeartRadio worked closely with Microsoft during the Windows 8 preview phase to develop the app to be available across a broad range of Windows 8 devices," read the iHeartRadio newsletter.

Both apps are available in the Windows 8 app store. Read more about Windows 8 here.