Apple reportedly refocusing iAd network to support upcoming streaming radio service

Tuesday, June 4, 2013 - 12:10pm

In anticipation of its Internet radio service, Apple is recrafting its iAd mobile advertising service in a way that will sell and deliver ads more reminiscent of Pandora, and even broadcast radio.

Apple is now reportedly courting major advertising companies and big-name brands to the iAd platform, and has mobilized both engineering and sales staffs in this effort.

The iAd platform is an ad network that can deliver ads to apps run on Apple mobile devices. Ads can be targeted to consumers based on other apps, music, movies, and books they've downloaded.

Businessweek explains that the iAd unit was initally created to run ads from third-party developers to encourage sales of the software they create and sell in Apple's App Store. Apple cofounder, the late Steve Jobs, "bought mobile-ad network Quattro Wireless to start an advertising platform in 2010," writes Businessweek. He "wanted the service to help developers make money so they would remain committed to making software for Apple’s products... The service was intended to make money for developers -- not Apple."

One obstacle Apple needs to overcome to convince big markets is iAd's lack of fine control over which apps will run their ads. What's more, advertising on it can cost more than rival services, and campaigns are limited to apps on Apple mobile devices.

To counter this, Apple has reportedly reduced its number of different charges and cut rates. They're also allowing agencies to use purchased inventory for more than one client, and have begun to accept ads for alcoholic beverages.

Part of Apple's licensing terms with labels, sources say, is an advertising revenue share. Though the company is hoping to announce the service at its developers conference next week, the iRadio service won't be publicly available to consumers until later this year, sources say, when Apple releases its iOS 7 mobile operating system.

Read more in BloombergBusinessweek here.

Apple's iRadio to reportedly pay Warner Music a royalty rate the same, or higher, than Pandora

Monday, June 3, 2013 - 11:40am

Apple has reportedly taken a step closer to launching its online radio service, by securing licenses from both label group Warner Music and music publisher Warner Chappell. Some observers are still looking for a launch at WWDC (Worldwide Developers Conference), which begins June 10. Earlier reports had indicated that Apple already had a deal with WMG (see RAIN here).

CNet's Paul Sloan writes today, "The deals reached so far offer far better economics for the music labels and publishers than what they get from Pandora, the product that most closely resembles iRadio."

CNet's sources say Apple -- which had been rumored to be getting a discount -- will pay labels and performers the same per-stream rate as Pandora (currently either $.00120 per song per listener or 25% of gross revenue, whichever is higher; more here). Interestingly, Billboard writes, "The agreement with Warner calls for Apple to compensate the company at higher rates than what is currently paid by most Internet radio services such as Pandora... around 0.16 cents ($.00160), similar to the rate Universal Music Group received."

The new service will net publishers "more than twice the ad share revenue they currently receive from Pandora," says CNet. The New York Times writes, "Publishers... paid about 4% of Pandora’s revenue... want as much as 10% from Apple."

Apple apparently will also share ad revenue with labels, and promises a more seemless way to purchase music via iTunes.

Notably, Apple will supposedly be allowed to enable listeners to "rewind" songs (prohibited by the DMCA's statutory license and all current SoundExchange licenses with various classes of webcasters -- see RAIN's royalty round-up here).

Among major labels and publishers, Apple still needs to secure deals with Universal's music publishing arm (the company already has an agreement with Universal Music Group) and both Sony Music and Sony/ATV (publishing) (more in RAIN here).

Read more in CNet here, The New York Times here,  and in Billboard here.

Sony music publishers reportedly want royalties "on par" with labels for Apple Net radio

Tuesday, May 28, 2013 - 11:55am

Some follow-up on our coverage from last week on slow-moving negotiations over iRadio between Apple and both Sony's record label and publishing (in RAIN here): Sony/ATV head Martin Bandier wants the songwriters and publishers he represents to collect royalties "on par with those of performers," the New York Post reports.

"Performers" here is likely PR-speak for "record labels," as both are paid on sound recording copyrights. While labels' share of streaming royalties dwarfs that collected by publisher/songwriter groups, music performers have complained vigorously about low pay for streaming play.

Apple reportedly hoped to launch its heralded "iRadio" Internet radio service by June, and sources said licensing deals with the two other major label groups (Warner and Universal) as well as performance rights organizations ASCAP and BMI (for most publishing) were in the bag. Now, apparently, the Sony Music label group and publishing group Sony/ATV are holding out (Sony/ATV withdrew its digital licensing from ASCAP at the beginning of the year, requiring services like Pandora to secure rights to their compositions directly, see RAIN here).

"Sony/ATV currently gets a 5% royalty but is pushing for a rate closer to 55% — what recorded music labels get," the Post wrote about the negotiations with Apple. "A source said that Bandier doesn’t feel he’s standing in the way of the launch — and that he would even accept a rate of 10% to 15% as a first step toward his goal of parity." Publishing group BMG Rights Management is reportedly also holding out for better terms now.

Besides simply seeing the high royalties labels are commanding, news source The Verge suggests consumers' changing music consumption is forcing publishers to demand more.

"Music publishers represent songwriters and composers, who make a big chunk of their royalties from CD and download sales. But those formats are in decline, disc sales have been plunging for a decade, and the growth in downloads has slowed to a trickle... publishers... don't make as much from streaming music."

The prolonged negotiations are also frustrating the other players who've already settled, according to the Post.

"There’s a frustration... [The Apple streaming service] is a net positive for the business. Apple is offering a 50/50 ad revenue share, minimum guarantees and royalties and the most successful ecosystem that’s ever been created. Unlike Pandora, the up-sell opportunity is enormous," an executive told the paper.

Read the New York Post here. Read The Verge here.

Low publishing fees, royalties on "skipped" songs could be sticking points for Apple to get iRadio out the door

Tuesday, May 21, 2013 - 1:45pm

Greg Sandoval at The Verge and Paul Sloan at CNet both report that negotiation snags are delaying Apple's roll-out of its much-anticipated "iRadio" streaming service (Apple reportedly wants to debut this summer at the latest, and possibly by next month's Worldwide Developers Conference).

Part of the problem is apparently that Apple's service will be more like Pandora, and less like Spotify. Sandoval writes, "The record companies and music publishers don't want another web radio service that satisfies a lot of music consumption but doesn't pay them much... The widely held belief by industry leaders is that to stop the slide in music sales, consumers have to be offered unlimited access to deep pools of songs that are supported by either small, monthly subscription fees, or advertising sales."

According to The Verge, it's Sony/ATV -- that's a music publisher, not a label group (and administers copyright song compositions, not recordings) -- that's holding up the negotiations. BMG Rights Management, the fourth largest music publisher, is another hold-out.

But CNet says it's Sony Music (the label group) holding things up for Apple, "over how much Apple would pay for songs that people listen to a fraction of and then skip." Sloan writes, "That skipping has become an issue is frustrating executives at the other labels because they see Apple's free radio service as a potential boon for the music industry overall and are eager to help the company get it launched... While it's unclear what Sony is asking for... if Apple bends for Sony on this issue, it would cause problems with its deals with Warner and Universal."

Read The Verge's coverage here and CNet's coverage here.

If license directly-negotiated, no guarantee on artists' earnings from Apple iRadio play

Tuesday, May 14, 2013 - 11:50pm

We've heard recently that Apple's "iRadio" webcasting service has hit snags in licensing discussions with rights owners (most recently here).

It's important to note that any such deals that result from negotiation with labels mean Apple will not operate under the statutory webcast license (any service willing to operate within the statutory's requirements can pay that rate -- no negotiation needed). A direct license with labels could allow Apple to avoid the statutory's specific limitations on the use of music (its prohibition on "on-demand" and other measures known as the "sound performance complement"). It might even grant Apple a preferred royalty rate.

Such an arrangement would also free the labels from the statutory's required 50/50 split of the royalties with performers. As per the DMCA, the royalties SoundExchange collects from webcasters operating under the statutory license get split between copyright owners (record labels, who get 50%) and performers (the featured performer gets 45%, with 5% going to musicians unions for backup performers).

But the DMCA also allows for copyright owners to negotiate directly with webcasters, which is what appears to be happening with Apple. In such a case, the DMCA's requirements (like the "sound performance complement" and the "50/45/5" split) don't apply. Performers would still most likely earn something from webcast plays on a service with a direct license, under the terms of their particular contract with their record label. But if some artists are chafing at what they're paid by webcasters paying the statutory, they'll likely make far less from Apple iRadio plays.

"And so, it didn’t take a rocket scientist to anticipate that direct licenses for an iRadio service could get negotiated at rates below the webcaster rates formally established through the Copyright Royalty Board (CRB) or published Settlement agreement," writes Washington and Lee University assistant professor David Touve in Rockonomic here.

It's feasible to imagine that a record label, no longer required to share 50% of the webcasting royalties, could grant a major licensee like Apple a significant discount, and still earn more than it would under that statutory. Apple's savings, and the labels' bonus, would come from what performers would have earned under the statutory license.

Apple's "iRadio" stalled yet again on royalties

Friday, May 10, 2013 - 12:45pm

The Financial Times reports that Apple's development of its "iRadio" streaming service are caught up by rights negotiations yet again, this time with Sony Music.

Apple reportedly has reached and agreement with Universal Music, and is close to a deal with Warner Music, leaving only Sony among the "big three" label groups.

Though Apple won't verify any details, or that they're even developing such a product, the Financial Times reports:

"These people said that Apple had first offered a royalty of about 6 cents for every 100 tracks it streams, but had raised this to about 12.5 cents, in line with the rate paid by internet-radio service Pandora. But it was unclear whether Universal had accepted the 12.5 cent rate, and other labels are thought to be pushing for better terms."

The paper's sources also suggest Apple has offered to pay for music rights on a per-track royalty, an ad revenue share, and a guaranteed minimum. Read the Financial Times' coverage here.

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