Author and professor Sinnreich illustrates Pandora and iTunes Radio "strategic positions"

Monday, July 1, 2013 - 1:40pm

Last week author, GigaOm Pro analyst, and Rutgers University SC&I assistant professor Aram Sinnreich gave a webinar on webcasting and digital music -- with a focus on Pandora and the coming emergence of Apple iTunes Radio.

Included in his slides, which are now available online, are "Strategic Position" breakdowns for both Pandora and iTunes Radio. He also included a visual depiction of how money flows from consumers through services to owners and creators (similar to the Future of Music Coalition's graphics here).

See Sinnreich's slides here.

Apple to reportedly pay indie labels 0.13 cents per-performance, share of 15% of ad revenue

Thursday, June 27, 2013 - 1:00pm

As Apple prepared to unveil its upcoming webcast service iTunes Radio, it negotiated "direct deals" with the major labels to license the copyright sound recordings they own. Apple has reportedly now circulated "similar though not identical" licensing terms to independent record labels.

The Wall Street Journal reports that Apple is offering to pay sound recording copyright owners a combination of a "per-performance" royalty and a share of advertising revenue (a "performance" means a single listeners hearing a single song). For the first year of iTunes Radio, Apple will reportedly pay indie labels 0.13 cents (or $0.0013) per-performance, plus 15% of its net advertising revenue (proportionate to the music's play on the service). For the second year, those numbers increase to 0.14 cents and 19%.

There's some special conditions involved here too, to which other webcasters that pay through SoundExchange are not afforded. The Journal reports, "Apple won’t have to pay royalties for some performances of songs that are already in listeners' iTunes libraries," which makes sense -- or, interestingly (though perhaps confusingly too) "songs that might be on an album that a listener owns just part of." Further, Apple will get to select what it calls "Heat Seeker" songs to promote, which are also exempt from royalties, as will be songs listeners skip after 20 seconds or less. However, in either case, Apple only gets to avoid paying for two songs per hour per listener. [The publication Hypebot has more explanation and analysis on this here.]

As mentioned, the major labels' terms are similar to those Apple is offering indies, though the majors reportedly get cash advances on royalties.

The offer of terms document, the paper reports, also refers to the possible use of music as background or "bumpers" for talk, weather, sports, and news programming. Apple won't pay for such use of indies' music.

For reference, Pandora pays the "Pureplay" rate, offered by SoundExchange to firms whose primary business is webcasting. For 2013, Pandora pays 0.12 cents per-performance, which will increase to 0.13 cents next year, and 0.14 cents in 2015. Rates for 2016 and beyond have not yet been determined.

"'Pureplay' webcasters, like Pandora, pay significantly lower per performance royalties than either broadcasters or those paying under the statutory rate," points out industry expert David Oxenford, "but are required to pay a minimum fee of 25% of the gross revenue of their entire business." (In other words, Pandora pays the greater of the per-performance rate or 25% of gross revenue. Details of the pureplay agreement are here.)

The statutory rate Oxenford refers to is what was determined by the Copyright Royalty Board to be a "fair market rate" for webcast royalties. Those not party to one of SoundExchange's alternative licenses (under the Webcaster Settlement Act) would pay the statutory, which amounts to 0.21 cents per-performance this year, rising to 0.23 cents for 2014-2015. Read more from Oxenford here.

One further, and important note, especially in light of the criticism directed at Pandora from the recording artist community: The law requires royalties paid by webcasters like Pandora to be divied by SoundExchange, with 50% going to the actual owner of the sound recording copyright (in the majority of cases, this is a record label), 45% to the "featured" performing artist, and the remaining 5% to unions that represent background vocalists and musicians. When sound recording copyright owners make direct deals with operators, as they have with Apple, they are under no obligation to share the royalty revenue with performers. (The paper's reporting of Apple's deals is very general, and we're not suggesting we know performers won't get directly paid in them. We're just pointing out that the law does not mandate a share for performers in direct deals.)

Though no specific terms were reported by the paper in regards to music composition licensing, the Journal writes "Apple is also offering music publishers more than twice as much in royalties than Pandora does."

The Wall Street Journal article is here. You can also read more in Crain's New York here.

iTunes Radio review: "First truly modern take on what terrestrial radio wishes it could be"

Friday, June 21, 2013 - 12:50pm

Fast Company's FastCoLabs has reviewed Apple's upcoming iTunes Radio (it's available to developers through the iOS 7 beta, which you can get here) -- and seems really enthused by the way Apple links song plays to purchase opportunities via iTunes.

"Radio was always meant to be a promotion tool, a way to sell more music," blogger Tyler Hayes wrote (he blogs at and contributes to Hypebot). "Now a 'buy' button lives next to every song, or a wish list one for those hesitant, and it feels like this is how modern radio should function."

Now, we've always felt that most professional webcast services make it plenty easy to buy the music you hear. But, arguably, already being "in" iTunes (and, more importantly, having those purchases affect the music you hear on your personal stations) seems pretty advantageous.

Another cool feature Hayes brings up is the "Song History," where you can go back and see what you've already heard, get a short audio sample to remind you which track it was that caught your ear 20 minutes ago, and buy it. Hayes calls it the "crown feature." He says, "iTunes Radio feels like the first truly modern take on what terrestrial radio wishes it could be."

Read the review here.

A veteran of 'strategic competition,' Apple needn't hit a home run to beat Pandora, says blogger

Friday, June 14, 2013 - 12:15pm

A contributor says webcaster Pandora is caught in a "seemingly intractable slugfest with no end," and is "vulnerable to a knockout" -- following both Apple's iTunes Radio announcement and new legal conflict with ASCAP and BMI.

BMI has announced it is ceasing rights negotiations and will file suit against Pandora after the company bought a small market radio station with the intent to qualify for broadaster licensing terms. ASCAP (which is being sued by Pandora) and the National Music Publishers' Association didn't care much for the move either. There's more here.

CNet (here) and Lifehacker (here) both point out what they see as some big advantages Apple has over Pandora.

Apple's more likely than Pandora to roll its new service out globally, says CNet, and this is huge. And while Pandora has made great strides towards dashboard integration, Apple's advantage in this area will be the voice-activated Siri technology.

Lifehacker points out Apple has the iTunes store and its massive mountain of listener-preference and purchase data. It also helps that iTunes has a tremendous "install base" across Apple devices and PCs (Mashable, here, says one analyst has determined Apple adds half a million new iTunes accounts every day!).

But the piece suggests Apple's service needn't at all be perfect to make life untenable for Pandora.

"Whether the iPhone maker’s service really improves on Pandora’s offering is almost beside the point," writes Mark Rogowsky on the site. "Apple will market it relentlessly and it doesn’t need iTunes Radio to be profitable on its own. That kind of 'strategic competition' has made life miserable for... competitors and its going to be a harsh one for Pandora."

He thinks Apple should buy Pandora. Read the piece at piece is here.

Analysts, and even competitors, expect Apple's iTunes Radio will be good for the industry

Tuesday, June 11, 2013 - 12:30pm

We're certainly seeing lots of coverage and reaction to yesterday's unveiling of Apple's new iTunes Radio. You've probably come across a bunch yourself, but we wanted to steer you towards a few interesting pieces:

  • Forbes' take is iTunes Radio will usher in positive expansion and growth for the record industry and Internet radio alike: Increased industry revenue; "mass acceptance" of music streaming; enhanced music discovery; and increased artist/songwriter royalties. Read the details in Forbes here.
  • Music Industry Blog says while it's true Apple has probably taken the "conservative me-too strategic option rather than bringing new transformative innovation," the new service should be seen (mostly) as a way to sell iPads and iPhones. Once all our data is in the cloud, the blog argues, device storage capability isn't as important, and device prices will fall, thus Apple's slow approach. Read more here.
  • A New Music Seminar panel in New York on Monday (which featured RAIN publisher Kurt Hanson, see more in today's issue here) featured several execs from companies who now find themselves in direct competition with Apple. Representatives of Pandora, Clear Channel, Spotify, and others welcomed Apple's entry as a validation of their own businesses, according to Billboard. Read more here.
  • Similarly, Pandora issued a statement yesterday about iTunes Radio, saying it brings Apple "on par with other streaming music services that have added radio into their feature sets." Pandora pointed to its 13-year history with Internet radio as a focus, not a feature. Slacker CEO Jim Cady pointed out Apple's closed ecosystem, saying "Walled gardens don’t benefit listeners and Slacker believes in the importance of giving users true freedom to access their content." Read more in Hypebot here and here.

Apple reportedly has all finalized deals with all major labels and publishers in time for WWDC

Monday, June 10, 2013 - 12:15pm

[From Monday's early edition:]

Today's the day -- Apple is widely expected to unveil its long-awaited Internet radio product to developers today at its Worldwide Developers Conference. The service is expected to launch for consumers in September, according to The Wall Street Journal.

Launch of the new service was delayed by negotiations with music labels and publishers, and the final deals weren't finalized until late last week (see RAIN here) (the final publishing holdout, Sony/ATV, has apparently reached an agreement with Apple -- see CNet's reporting here).

The Journal reports that two of the tougher matters to settle were "the point at which Apple must begin sharing ad revenue with the labels and the minimum guarantee it would offer as an insurance policy." There was also disagreement over "whether Apple will have to pay for songs listeners skip — it won't under some deals — and how well it should compensate music publishers."

All Things Digital's Peter Kafka writes today that "If Apple wants to generate real ad money for iRadio, then that means it has to try to crack the market for radio ads. And that is a very, very un-Appley business.... It doesn’t really matter what kind of precision targeting the Internet offers — the bulk of that $14 billion comes from local ad sales," he wrote. "And it’s a slog." Read more from Kafka here.

According to the paper's sources, Apple will pay the labels about half of the ad revenues, with publishers getting only 10% (which is actually more most webcasters and broadcasters pay).

Read more from The Wall Street Journal here.

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