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Why Apple's plan for a streaming radio service is starting to fray
Record executives are scoffing at Apple's proposed royalty rates, which are about half of what Pandora pays
 
Apple and Beats: They would be so cute together.
Apple and Beats: They would be so cute together. CC BY: foeock

Earlier this week, it was widely reported that Apple was partnering with Beats Audio to build a new streaming music service to rival the Pandoras and Spotifys of the world. For Apple, such a service would serve as a sparkling new revenue channel on iTunes; for Beats, the partnership represented an entryway into the lucrative marketplace for digital goods. Things were looking good.

On Thursday, however, the rumored plans for iRadio reportedly hit a snag. According to the New York Post, Apple is apparently lowballing record labels for rights to their music, offering 6 cents for every 100 songs streamed — about half of what Pandora pays. For comparison:

• Pandora pays 12 cents per 100 songs
• iHeart Radio pays 22 cents per 100 songs
• Spotify pays 35 cents per 100 songs (the highest rates in the industry)

In other words, says Kyle Wagner at Gizmodo, "Apple is being a massive cheapskate."

According to insiders, the original plan entailed debuting iRadio alongside the iPhone 5 last year, but that scheme quickly unraveled when the industry's top music publisher, Sony/ATV, refused to cooperate. Sony/ATV demanded an upfront fee and a percentage of Apple's intended ad revenue in addition to streaming fees. Now, led by chief negotiator Eddy Cue, Apple could be looking to fold iRadio into iTunes Match, a digital locker for customers to access their music from all their devices at a cost of $25 a year.

For all of Apple's successes, building an ancillary music product to supplement iTunes has presented a rare stumbling block. Remember: The company fumbled Ping — Apple's attempt to build a social network around musicians — which was quietly killed last September. And while negotiations for the rights to stream music content are still ongoing, Apple could be feeling external pressure to hammer out a deal soon. Google is said to be closing in on a similar deal with music labels to build its own streaming music service via YouTube.

 
Chris Gayomali is the science and technology editor for TheWeek.com. Sometimes he writes about other stuff. His work has also appeared in TIME, Men's JournalEsquire, and The Atlantic.

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