Apple’s ‘iRadio’ Streaming Excites Labels, Sony Hung on Skipping

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Warner Music Group and Universal Music are both excited about Apple's planned streaming service (dubbed "iRadio" in the media), but Sony Music is apparently hung up on how much it gets paid for songs that are skipped. Citing unnamed sources, CNet reported that the other labels are frustrated about the hang-up because they believe that Apple can help grow the Internet streaming market.

Apple Reportedly Plans Streaming Service

Rumors have swirled and whirled about Apple's planned streaming service, so much so that many in the media saw Google's All Access launch this week as some sort of major victory because the search giant beat Apple.

Of course, the reality is that it won't matter, and even though Apple is coming to market behind Google, Spotify, Pandora, and Rdio, it's Apple's service that is going to set the bar and define success. It would seem that at least some of the labels understand this.

At issue with Sony is how much the company will get paid when a user skips a song. You read that correctly, the hang-up stems from Sony wanting to get paid more for having a song not played. It's kind of disgusting, in my opinion, akin to the labels wanting a share of Apple's iPod hardware profits and saddling us with DRM for so long.

Then again, what more can you expect from Sony Music CEO Doug Morris, a music executive who thinks that Steve Jobs screwed the labels by saving their bacon and dragging them kicking and screaming into the age of iTunes.

When last we paid attention to Mr. Morris in 2007, he was busily rallying the music industry to support Microsoft's Zune in order to beat Apple. At the time he said that the labels had ceded too much control to Apple, and that, "We got rolled like a bunch of puppies [by Steve Jobs]."

That same year, he told Wired, "We were just grateful that someone was selling online. The problem is, [Apple/Steve Jobs] became a gatekeeper. We make a lot of money from [Apple], and suddenly you're wearing golden handcuffs. We would hate to give up that income."

How'd that work for you, sir? Microsoft's Zune went the way of the Microsoft Kin, and Apple still feeds hundreds of millions of dollars into you coffers through iTunes. Gods forbid that you get rolled like that again...

This weird myopia that some music (and TV/movie) execs have about Apple has always mystified me. They're terrified of licensing content to Apple because Apple will get it right, get all the customers, and then own the experience. Never mind that other companies don't get it right and that part of why Apple is so successful with things like iTunes is because the company owns the customer experience.

In the meanwhile, other services like Pandora also have to pay for songs that get skipped, but CNet's Paul Sloan noted that Pandora's deal is governed by federal statute, while Apple is working out individual licensing deals with the labels.

Apple is also keen on getting all of the labels on board with the same deal lest there be problems further down the road. This is how Apple has worked out all of its licensing deals in the past, and it's how the company runs iTunes, the App Store, the Mac App Store, and iBooks.

What precisely Sony is holding out for is unknown, but what the other labels are excited about is revenue sharing from subscriptions and ads that Apple plans to run, as well as the potential for increased music sales. Apple will reportedly be making it easy for customers to buy a song they're streaming direct from iTunes, offering a third revenue stream to the labels.

As demonstrated by his ability to roll music execs like puppies, Steve Jobs was an amazing negotiator. He may be gone, but the company he built still has a lot of negotiating weight.

It remains to be seen how this will work out, but we're interested in seeing the company put the pieces in place to roll out its streaming service and hope that Sony slaps on this new, even bigger pair of golden handcuffs.

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7 Comments Leave Your Own

mhikl

Me no understand. Woe be the times we gave up stocks and spanking. Just look how Larry turned out, now punished by conscience. He hath no tongue and Sony no ear.

akcarver

In this age of bandwidth caps for iPhones, I can’t understand why anyone would stream music. You would very quickly eat up your allowance, and have to pay a huge (IMHO) fee for overages.

wab95

I can’t understand why anyone would stream music.

@akcarver: For many music lovers, it provides an opportunity to hear music that you don’t own, when and how often you want to hear it. Assuming that Apple make the arrangement with iTunes, now you’ll be able to purchase it in app on the fly.

Bryan: Speaking of purchasing streamed music, one can, sort of, do this now with iTunes. I listen to the two classical music stations I support online, particularly when overseas. When I hear a performance (one does not refer to classical music as ‘tunes’ or ‘songs’) that I like, I access the station’s playlist, click to purchase and, depending on the station, can opt to be taken to iTunes or Amazon. Needless to say, the experience is not seamless, often fails to link to iTunes, and without doubt Apple can make it better, simpler and more efficient.

That said, I think, given Apple’s proven record of massive sales and runaway success with their online music/movie/TV store, industry execs have been trying to use Apple’s competition as negotiation counterweight. I don’t believe, at least in 2013, any of these execs really believe, given the inconsequential mobile marketshare of MS, or the paltry purchasing performance of Android clients, that they are going to make inordinate amounts of money through these competitors - a notable exception being Amazon - but even here, the volume and revenue are not quantified, so it’s difficult to make comparisons. Indeed, as you point out, even as they sign with these Apple alternatives, they already recognise the potential Zune-like fate service they sign onto, and the revenue to match.

Rather I submit that, like Sony cited above, they hold out by any means necessary for the best possible deal with Apple, knowing full well that they stand to make boatloads of money once the service starts because Apple clients will buy; but why settle for mere boatloads when rivers, nay oceans can be your coffers?

One cannot fault the labels for being excited about the prospect of signing on with Apple. Perhaps that peer pressure will move Sony to settle sooner rather than later, but I wouldn’t count on it.

 

Bryan Chaffin

Greta comments as always, wab95. Thanks.

I imagine that Sony will cave and accept the deal the other labels took. This is predicated on my belief that Apple will be willing to launch without Sony. Apple and Sony Music need each other to make this work, but Sony Music has a little more need than Apple.

Toi-ventor

Can we use it in car? Only time to listen to music is while driving.

ibuck

Bryan: my belief that Apple will be willing to launch without Sony.

From your lips to Tim Cook’s ear !

If Sony Music goes an entire quarter without this potentially sizeable revenue stream, Sony shareholders might choose to release an exec clinging to emotions that hinder his performance.

wab95

Can we use it in car? Only time to listen to music is while driving.

@Toi-ventor:

I’ve not personally done this with streaming music, but I have with iPhones and iPods using playlists and podcasts; if your car has an adapter (typically USB) for the device and allows it to interface with and play through your car system, then yes, you should be able to.

For older cars, there are third party adapters that you can purchase either online or at the Apple Store for older cars that permit you to plug your device into your car stereo, depending on the vintage, and by selecting FM channels at the low end, play your device on your car stereo. I’ve done that as well, although the experience is sub-optimal.

Good luck.

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