While Apple’s negotiations with the major labels for its new iTunes Radio service have been well publicized, its dealings with independent labels are just now surfacing. The Wall Street Journal has acquired a copy of the terms Apple is offering to independent labels for royalties and says they are mostly “more generous” than what Pandora pays out.
The payments are based on a combination of how many times songs are played and how much advertising is sold by Apple.
According to the WSJ, in the first year of iTunes Radio, Apple will pay the indie labels 0.13 cents for each play of a song, as well as 15 percent of net advertising revenue, proportionate to a given label’s share of the music played on iTunes. In its second year, the rate increases to 0.14 cents per listen, plus 19 percent of ad revenue.
By comparison, Pandora pays 0.12 cents per listen. The WSJ says that Apple is also offering music publishers more than twice as much in royalties as Pandora. The WSJ also notes that Apple will not pay out 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 promotions, are also exempted.
Apple also doesn’t have to pay for songs listeners skip before 20 seconds have elapsed.
The company only gets to avoid paying royalties for two songs per hour for any given user.” The terms for independent labels are described as “similar but not identical to those” agreed to by the major labels. In related news,
Apple has applied for a patent to upgrade iTunes Radio down the road.
According to CNet, it would give more customization options and allow for better feedback from the user to Apple as to why you did or didn’t like a particular song. However, the patent dates back to December 2011, so some of the features described may have been intended for iTunes Radio’s initial version.
