Bloomberg

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.

Earlier this month we learned that on-demand music service Rdio was developing a Pandora-like radio feature. Now Bloomberg reports Spotify is also building an ad-supported Internet radio service "that would directly challenge Pandora."

That's according to "two people with knowledge of the situation... who weren't authorized to talk publicly."

An Internet radio service would offer three advantages for Spotify, Bloomberg reports:

1) Spotify could pay lower royalty rates for songs played in a radio setting. 

2) Spotify could play any music it wants thanks to Internet radio's statutory license, unlike its on-demand service which depends on direct licenses and thus allows rightsholders -- like The Beatles, The Black Keys and Adele -- to bar their music from being played (industry attorney David Oxenford has more on this topic here).

3) "An online radio offering would advance Spotify’s strategy of attracting users with free, ad-supported services who can be converted later into paying subscribers," writes Bloomberg, which also points out that Spotify has 10 million registered users worldwide (3 million paying), while Pandora has 150 million registered users.

That echoes arguments from Rdio's VP of Product, who said its users crave a "lean-back" music experience (RAIN coverage here).

There may be the additional benefit that it's easier to monetize an online radio stream. Users may find an audio ad interupting their music more expected and palatable in a radio-like format (like AM/FM), as opposed to the on-demand experience (which is more akin to listening to an album on an iPod or CD player).

Spotify already offers a radio-like service, in which users input an initial artist and Spotify plays similar music. But that service is much more akin to an automatically generated on-demand playlist -- the user can go backwards as well as forwards and bookmark tracks for later on-demand listening.

Bloomberg reports the new radio service will launch within the year. A Spotify spokesperson said they have "no announcements to share at this time." 

Spotify has already begun moving into territory traditionally dominated by radio with the launch of third-party apps from the likes of Last.fm, Rolling Stone, Pitchfork, Soundrop, We Are Hunted and others. Many of the apps create radio-like music line-ups for users, while others offer curated recommendations (RAIN coverage here, here and here).

The takeaway from all this: the web radio format seems to offer many advantages to on-demand music services. Pureplay webcasters like Pandora -- as well as broadcasters hoping to gain audience online -- may face additional competition in the near future.

You can find Bloomberg's report here.

Pandora's recent move to slash its monthly listening limits for free users (RAIN coverage here) may lead to $53 million in additional revenue over the next four years, according to one analyst.

Scott Devitt, a Morgan Stanley analyst, tells Bloomberg the change may have plugged a loophole that allowed users to listen on mobile devices even after reaching their 40-hour-per-month limit.

Devitt says Pandora's desktop listeners generate nine times the revenue of the service's mobile users. But he believes the company's mobile revenue will "almost double to $40 [per hour] in 2016," surpassing licensing fees of $23 per hour.

More than half of Pandora's audience in August was mobile, according to comScore (here). Bloomberg reports that 70% of Pandora's usage comes from smartphones and tablets.

Devitt predicts Pandora will reach 159 million active listeners worldwide by 2021.

Bloomberg has much more coverage on Pandora and its mobile monetization right here.

Bloomberg earlier this week announced the launch of its Bloomberg Radio+ app for iPhone and iPod Touch devices. Users can stream Bloomberg Radio 24/7 via the app, listen to on-demand podcasts, view "real-time charts, get the latest market information and news, and access guest bios," says Bloomberg.

Writes Audio4Cast's Jennifer Lane: "It is a good example of the way a radio app can become so much more on a mobile device…[the app] is a big value proposition for listeners -- and a smart move for Bloomberg." You can find Lane's coverage here and Bloomberg's press release here.