The terms between Apple and the record labels for the iTunes Radio streaming music service were revealed by The Wall Street Journal late Wednesday. The report includes information on the amounts Apple must pay along with special circumstances that are exempt from payment.
The newspaper reportedly obtained the information from independent record labels, which have recently begun talks with Apple to join iTunes Radio after the Cupertino company had already secured the major labels prior to WWDC. The Wall Street Journal reports that the terms for these independent labels are very similar to those agreed to by the major labels.
According to The Wall Street Journal’s sources, Apple will pay 0.13 cents ($0.0013) each time a label’s song is played by an iTunes Radio subscriber during the service’s first year of operation. Labels will also receive 15 percent of net advertising revenue generated by the service. In iTunes Radio’s second year, the rate per song increases to 0.14 cents ($0.0014) and ad revenue share jumps to 19 percent.
By comparison, iTunes Radio competitor Pandora pays approximately 0.12 cents per song, although Apple’s royalty payment to publishers will reportedly be more than twice that of Pandora, according to The Wall Street Journal. The paper did not provide further information on how publisher rates, which are calculated separately from payments to the record labels, will be calculated.
In an interesting provision, Apple won’t have to pay royalties for songs that are already in a user’s iTunes library, or “songs that might be on an album that a listener owns just a part of.” It’s unclear if this alleged provision applies only to tracks and albums purchased from the iTunes Store, or if the existence of a track in a user’s library as a result of the iTunes Match service will also exempt Apple from payment.
Further, Apple will also escape royalty payments for certain tracks selected by iTunes for special promotions, called “Heat Seekers,” or if a user skips a song in less than 20 seconds. However, all of these provisions will only apply for up to two songs per user per hour, with Apple forced to pay royalties after that limit.
iTunes Radio is currently in testing by developers as part of the iOS 7 beta. It will launch for all users this fall alongside the public release of iOS 7 as a free ad-supported service. iTunes Match customers will be able to receive an ad-free experience as part of their existing $25 per year membership fee.
