HITS Daily Double
Apple will pay royalties to labels based on a blend of how many times listeners hear their songs and how much advertising
it sells.


Indies Get Better Than Expected Terms Free of the Anticipated "Take It or Leave It" Posturing
Before announcing the upcoming launch of iTunes Radio, Apple circulated terms to indie labels that were better than expected and more generous than what Pandora currently pays, The Wall Street Journal reports. As it turns out, the terms for the indies are similar but not identical to those given to the Big Three, which are expected to receive cash advances against future royalties.

According to the Journal, which reviewed the documents, Apple will pay royalties to labels based on a blend of how many times listeners hear their songs and how much advertising it sells. 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 ad revenue, proportionate to a given label’s share of the music played on iTunes. In the second year, the rate gets bumped up to 0.14 cents per listen, plus 19% of ad revenue. That compares to the 0.12 cents Pandora pays labels per listen. Apple is also offering publishers more than twice as much in royalties than Pandora does.

Pandora founder Tim Westergren said yesterday that it isn’t fair to compare Apple’s royalty rates with Pandora’s because the services work differently, and that different features on the two services could trigger different royalty payments. "It’s apples and oranges," he argued.

In other revelations, Apple won’t have to pay royalties for some performances of songs that are already in listeners’ iTunes libraries, or songs that might be on an album that a listener owns just part of. Similarly, "Heat Seeker" tracks selected by iTunes for special promos are also exempted. Neither will it have to for tracks listeners skip within 20 seconds . The company only gets to avoid paying royalties for two songs per hour for any given user.

The ad revenue iTunes Radio generates might not necessarily be more significant than Pandora’s, the WSJ contends. People familiar with Apple’s thinking told the paper the company is primarily hoping that iTunes Radio will encourage listeners to buy the tracks they like at the iTunes Store. The tech giant's download business has become marginally profitable in recent years, these people pointed out, and the company will stick with the download model for as long as it remains sustainable. Apple also believes downloading helps it move more iPhones, iPads and other hardware.

The new radio service gives Apple a venue to develop its iAd system--a mobile advertising platform for Apple devices that allows third-party developers to embed their apps with ads, according to these same insiders.

In the now-standard tag for any reportage about the company, the story ended, "An Apple spokeswoman declined to comment."