Apple’s Pandora-Like Music Service Stalled Over Streaming Fees

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Sony/ATV Music Publishers

Negotiations for an Apple music streaming service have stalled over disagreements on the cost of streaming rights with Sony/ATV Music Publishing, the New York Post reported late Thursday. The proposed streaming service, akin to one offered by Pandora, was first revealed in early September by The Wall Street Journal.

Sony/ATV, the world’s largest music publisher, and Apple couldn’t agree on a per-song rights fee, sources close to the situation said. Those rights are usually tenths of a penny per stream, sources said. Sony/ATV was looking for a higher rate.

Further complicating the situation is the fact that Sony/ATV is about to pull out of the two primary copyright associations, Ascap and BMI, this January. Once removed from the associations, streaming music services like Pandora, and the one proposed by Apple, will have to unilaterally negotiate with the publisher, making it more difficult, and likely more costly, to secure streaming rights.

Apple SVP Eddy CueEddy Cue
Apple SVP of Internet Software & Services

Sources close to the negotiations, which are being led Apple's SVP of Internet Software and Services Eddy Cue, say that Apple was aggressively pushing the music publishers for lower streaming fees than are charged to services like Pandora. Apple justified its demand for lower fees by explaining that its proposed service would be more flexible to the desires of the publishers, playing songs that publishers wanted to promote at the time, instead of relying solely on the listener’s musical preferences, as Pandora claims to do.

Further sweetening the deal for the music publishers is Apple’s dominant iTunes Music Store, to which the company would be easily able to direct listeners to for track and album purchases. Services like Pandora currently have the ability to direct listeners to purchase tracks on iTunes and competing services such as Amazon. It’s unclear if Apple plans to offer a more captivating or effective purchasing experience.

Apple Music Streaming Negotiations

Sources close to the matter indicate that Apple hoped to have the service ready to launch alongside the iPhone 5, but the difficult negotiations delayed its debut. If a deal with publishers can be reached, Apple will have an additional opportunity to announce the service this fall, during the introduction of the widely expected iPad mini.

Any Apple streaming music service is expected to hit competitors hard. Pandora stock tumbled in early September following The Wall Street Journal’s discussion of the proposed service and Spotify may have to consider altering its pricing model. One ray of hope for these services is the expectation that any Apple service will not be available outside of the iOS and Mac ecosystem, leaving Android, Windows Phone, and Blackberry as potential playing ground.

Apple (AAPL) is currently trading at $673.84 (down $7.40, 1.09%) ; Pandora (P) is currently trading at $10.90 (down $0.06, 0.55%).

Teaser graphic via Shutterstock.

[via MacRumors]

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