Apple iRadio royalty terms leak out, and they could kill Pandora

Apple iRadio royalty terms leak out, and they could kill Pandora
There was a lot of talk about Apple's upcoming iRadio service in the leadup to WWDC because Apple was scrambling to sign deals with all of the major record labels before the conference began. The timing of it didn't necessarily matter, because iRadio won't be released until the fall, but Apple wanted to have everything square before announcing the product. Now, we're learning more about the terms Apple negotiated on royalties, and it turns out that Apple's terms could be very bad news for Pandora.

According to The Wall Street Journal, Apple is paying much higher rates for iRadio than its most direct competitor, Pandora. Apple will pay based on a combination of the number of times a track is played and how much Apple generates in ad revenue. Apple won't pay royalties on tracks that are in a listener's iTunes library, but on other music will pay a label 13 cents each time a song is played, as well as 15% of net advertising revenue, proportionate to a given label’s share of the music played on iTunes for the first year. In the second year, the royalties increase to 14 cents per listen, plus 19% of ad revenue. Apple is also offering music publishers as much as twice the rate that Pandora pays. 

This is extremely bad news for Pandora, because the company simply can't afford to pay the same rates as Apple. Pandora has been paying 12 cents per listen as part of its free service, and the company has been actively lobbying artists to help get those fees lowered. Pandora has said that it can't make a profit with the current royalty rates it pays. So, where Google tends to kill rivals by offering free services, Apple may end up taking out Pandora by paying far more than Pandora can afford. 

Of course, Pandora founder Tim Westergren says that comparing the two payment plans is comparing "apples and oranges" because the services work differently and generate different payments. So, at least he's not too worried. 

source: WSJ



1. Sauce unregistered

Why isn't there a PA mobile app...?

5. MichaelHeller

Posts: 2734; Member since: May 26, 2011

8. quakan

Posts: 1418; Member since: Mar 02, 2011

I wish PA's site automatically redirected mobile phones to the mobile site like most sites do. Until your post I just assumed there wasn't one.

9. Libra501

Posts: 14; Member since: Oct 05, 2011

i wish for Mobile app, not a mobile version

11. Reluctant_Human

Posts: 913; Member since: Jun 28, 2012

I just follow them on Google+ for updates when I'm away from my computer. Much more convenient than a PA app in my book.

2. InspectorGadget80 unregistered

How's this suppose too kill Pandora? Not like everyone owns a iPhone.

3. Ralston1983

Posts: 70; Member since: Feb 03, 2011

Pandora is already hurting and that's why they're paying such a low rare for royalties. Now if they lose music due to labels being exclusive to iRadio, it's going to hurt them more.

4. Ralston1983

Posts: 70; Member since: Feb 03, 2011


7. Dorothy69

Posts: 498; Member since: May 21, 2013

Because Apple will pull Pandora from the App Store [like they did Google Maps a while back] and force the flock to use iRadio.

10. greathero1

Posts: 584; Member since: Jun 13, 2008

It has nothing to do with the iPhone but more to do with the royalty deal which is irrelevant across all platforms. If Pandora is having a hard time making money right now with the lowball figures, just imagine how tough it's going to be once their contract is up for renegotiation. If they are forced to sign a similar deal, they are toast. Come on bro. Did you read the article at all?

6. damokles unregistered

does a "listen" counts as a fully played song or just a part of the song?

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