Apple

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.

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.

Make way for the big boys.

"Companies like Google, Apple and Facebook are eyeing the streaming and on-demand music business now dominated by smaller niche companies such as Pandora and Spotify. When they do -- and most analysts agree it's really just a matter of time -- they could give nearly everyone the ability to listen to whatever they want, whenever they want -- and mostly for free," wrote San Jose Mercury News' Heather Somerville yesterday.

If true, this brings up a whole host of issues, some of which Somerville explores, like the impact on artists, consumers' relationship with music, and others. But where does it leave Internet radio: both pureplays like Pandora, and music broadcasters who'll rely more and more on digital efforts to grow? Smaller companies will have to become even more creative and agile to offer a value proposition the larger companies can't -- a sort of "boutique" existence, catering to niche and local audiences. 

"There is no doubt that when companies this large enter into the field, it will be disruptive," Jonathan Handel, a media and entertainment attorney, told the paper.

Read more here.

Webcaster (and recent Webby winner, see RAIN here) Songza has revealed some impressive usage stats.

Songza says its service -- with the Concierge feature that offes playlists based on time of day and likely listener activities -- now reaches 4.7 million monthly "active users," generating nearly 1.1 million hours of listening each day. They've streamed more than 560 million songs in the last 30 days.

The webcaster has also released a pretty significant update of its mobile app for Apple devices. Its 3.0 version for iOS includes six significant improvements. One is "HQ Audio," powered by technology from Audyssey Laboratories, designed to improve headphone sound quality without requiring higher bitrates (and increased data usage). Other new features include faster ways to find favorite artists, discover new playlists, and -- by shaking the mobile device -- find a playlist to suit your current activity.

Songza says its apps have been installed six million times.

Last month RAIN reported (here) that Songza completed a $3.8 million fund-raising round.

Read more on today's news in Hypebot here.

A recent piece in GigaOm suggests Apple will launch an Internet radio service not to compete with Pandora, but to bolster its music sales business against competition from on-demand services like Spotify.

As NPD Group's Russ Crupnick explained to the RAIN Summit West audience in Las Vegas, his company's data shows 38% of American consumers still think it's important to "own" music (as opposed to accessing it via on-demand streams). But for users of Pandora and other webcasters, that number rises to 41%. What's more, many of these respondents said they've purchased more new music because of what they hear on these services.

It's logical to assume, as GigaOm contributor Janko Roettgers, that partisans of on-demand services -- since they basically have any music at their fingertips at any time -- aren't nearly as compelled to purchase music downloads.

So, while the Spotify-type services, since they replace music ownership, compete with iTunes download sales, Pandora actually encourages music sales.

Apple's move would simply keep that stream listening "in-house" (and perhaps they can sell some ads) and make it ever-so-slightly easier and quicker to sell a download.

Not that this will be easy. An article from The Street (in MSN Money) reminds observers that even a titan like Apple "cannot overcome Pandora's enormous first-mover advantage."

Two major points here: (1) Pandora has created an extensive sales structure with the goal of capturing traditional radio ad spending. Apple is far behind in this respect; (2) Apple "simply will not be able to do personalization and discovery -- two key components that set Pandora apart from its competition -- at the level necessary to match the quality of Pandora's offering as push-a-button-and-li​sten-wherever-you-ar​e radio." writes The Street.

Regardless, as the NPD data also shows, Apple's share of the download market (while still as dominant 63% in 2012) has been falling in recent years (from 68% in 2011, 69% in 2009).

Roettgers concludes, "That’s why it’s smart for Apple to invest in iRadio. The goal is not to kill Pandora, but to actually bring that type of radio service to more users, and keep them from switching to a full-blown access model."

Read the GigaOm piece here; Reuters on more NPD data here; and The Street in MSN Money here. Finally, listen to NPD Group's Russ Crupnick's presentation from RAIN Summit West here on SoundCloud (press the orange "Play" button when the page loads).

New reporting from CNet is possibly giving some shape to Apple's much-anticipated streaming music service.

All of these details are sourced from the ever-insightful "people familiar with the negotiations," so none are official. But according to what CNet has heard, Apple is close to settling with Warner Music and Universal Music groups (not yet Sony, nor publishers) for a summer U.S. launch of a non-interactive (like Pandora, not like Spotify) streaming service.

Allegedly Apple will pay royalties less than the statutory rate, and just half what Pandora pays. But to sweeten the deal, Apple will share ad revenue -- possibly as much as 35%-45% -- from a new class of audio ads (not simply the small iAds displays). And Apple is supposedly "proposing to the labels... a full-on, multinational sales force that would sell audio ads akin to what Pandora serves up for listeners to its free service." Apple also hopes to launch the service in the UK, France, Germany, Australia, and Japan (Pandora is legally available only in the U.S., Australia, and New Zealand).

Read more from CNet here.

RAIN ANALYSIS: We'd like to know much more about (a) features that will make Apple's service unique in the marketplace (the CNet article mentions features like "going back to the beginning of the song" and "making it easier to purchase music," which sound mildly interesting, but aren't really anything to hang a service's hat on; and (b) how the music will be "programmed" (i.e. human curation, internal iTunes data, third-party data). An automated, curated radio service based on iTunes data would be something genuinely new in the marketplace, which is currently dominated by only Pandora's Music Genome and services that use The Echo Nest. But would it be noticeably different from a user's perspective? -- MS