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Apple's iTunes Radio Terms With Record Labels Revealed

The Wall Street Journal is reporting that Apple sent its iTunes Radio terms to independent record labels last week and the paper was able to review a copy of the contract. It dictates that Apple will pay record labels both in royalties on individual song plays, as well as how much advertising Apple is able to sell.
During iTunes Radio’s first year, Apple will pay a label 0.13 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. In the second year, that bumps up to 0.14 cents per listen, plus 19% of ad revenue.
That's compared to the 0.12 cents -- $0.0012 -- that Pandora pays labels per play, although the paper says Apple will be paying publishers more than twice as much in royalties than Pandora. For streaming music, publishers and record labels are paid independently.

There are also restrictions in place that allow Apple to not pay royalties. Some song plays are unpaid if they are already in a listener's iTunes library or part of an album they own, tracks selected by iTunes for special promotion, or if listeners skip a song before the 20 second mark. However, Apple can only avoid royalties for two songs per hour per user.

itunes radio
And while these terms were sent out to independent music labels, the WSJ claims they are similar to the terms major labels like Universal Music Group and Warner Music have signed.

Apple doesn't expect iTunes Radio to generate much ad revenue, but hopes it will drive iTunes sales and help sell more iPhones, iPods and other Apple hardware. The company does hope it can help grow the iAd mobile advertising platform.

Finally, the paper says the terms include "several references to terms for the use of music in talk, weather, sports and news programming" on iTunes Radio and that Apple wouldn't have to pay royalties on music snippets used in those types of programming.

The WSJ believes it is "unlikely Apple will invest much in creating such programming, given that it has long shied from creating its own content".

The details offer a look into the terms long debated in the negotiation process between Apple and music labels. Apple reportedly agreed to higher royalty rates in early April, and then signed deals with the major labels in time to announce the new service at the Worldwide Developers Conference in early June.

Top Rated Comments

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16 months ago

Still don't see a point in Apple duplicating what Pandora already does so well.

Also, can someone please take iAd out back and shoot it?


...

Apple doesn't expect iTunes Radio to generate much ad revenue, but hopes it will drive iTunes sales and help sell more iPhones, iPods and other Apple hardware. The company does hope it can help grow the iAd mobile advertising platform.


This will reach more people than Pandora has ever had, overnight. And the music industry wants that.
Rating: 21 Votes
16 months ago
i like iTunes Radio, much easier to use than Pandora. No ads for iTunes Match customers too!
Rating: 15 Votes
16 months ago

Everytime someone plays a song on these phony radio/spotify services, the artist makes about a cent.


That's pretty impressive given that the streaming companies are only paying the labels about one tenth of one cent per song.

Why not just pay for your music.


And who are you to tell other people how they would like to listen to their music? If people prefer listening to streaming radio, they'll do so. Markets will respond and the contracts will be hammered out. It's just the way the world works.
Rating: 15 Votes
16 months ago

Why not just pay for your music. Everytime someone plays a song on these phony radio/spotify services, the artist makes about a cent.
Some one will definitely find a way to remove the ads.


Or we could all go back to stealing music if you'd like?
Rating: 8 Votes
16 months ago
Apple is not getting as much as Pandora but how many people will switch to iTunes radio for $25.00 a year for iTunes Match + iTunes Radio or pay $4.00 a month for pandora? I bet A LOT of people are going to switch I know I did and a lot of people I know will be doing the same.
Rating: 5 Votes
16 months ago
Still don't see a point in Apple duplicating what Pandora already does so well.

Also, can someone please take iAd out back and shoot it?
Rating: 5 Votes
16 months ago

Why not just pay for your music. Everytime someone plays a song on these phony radio/spotify services, the artist makes about a cent.
Some one will definitely find a way to remove the ads.


A cent? Are you kidding? It takes 7 1/2 plays of a song to make one cent. (.01)
You know how much it takes to make $5,000? 3,846,153 plays.

I recommend you go google what Pink Floyd had to say about Pandora, et all.

I've talked to a couple smaller bands. They are big enough to play venues in most big cities and travel the world non-stop playing. They said they are making no money off their music anymore. It's all about getting out there and playing live and getting gate money as well as getting some extra money from merch they sell at shows.

To the extreme, you can read what Metallica wrote. Basically, they have to tour every year or they lose money on their infrastructure of management, attorneys, staff, studio equipment bills, etc..

It will be interesting to see what happens in the near future as more and more people move to these streaming services or just steal music outright.
Rating: 3 Votes
16 months ago
iTunes Radio is great so far. Unlike Pandora and Slacker, it actually plays music that if you listen to that artist, you'd actually listen to. I haven't had the need to use the skip feature until after like 20 songs or so. That's REALLY going to help set them apart from the others, having that HUGE database of purchases and knowing their audience so well because of it.

People don't want to DISCOVER music, they just want to hear the stuff they like, and these other services don't seem to get that.
Rating: 2 Votes
16 months ago
These royalty rates are interesting. Looks like it could cost Apple a fortune?
Rating: 2 Votes
16 months ago
I'm cheap, so I'll be using iTunes radio free. I'll put up with listening to an occasional ad. No problem. What I won't put up with are the pop up ads that cover up the app interface and other visual content (I'm looking at you, Pandora)

In the end, I'll switch from pandora Lite to iTunes radio because of the larger catalog. If there's no pop up ads, then thats a bonus. iTunes radio might be the feature that gets me to subscribe to match.
Rating: 2 Votes

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