According to a copy of the document obtained by Billboard, Apple will not have to pay for any content during the beta launch of the service, which can last up to 120 days.
The service will allow listeners up to six song skips per hour, if they do so in the first 20 seconds of the song, and will also allow Apple to forego any payments on song skips. Apple doesn’t have to pay for those song skips.
While listeners can’t rewind or start songs over, they can pause them and resume play. Also, Apple is allowed to display album artwork to listeners, and they can advertise to listeners what is playing at the moment on other Apple-built stations.
The payment terms to labels, according to the document, calls for Apple to pay labels a royalty of $0.0013 per song plus 15% of net advertising revenue for the first year; while in subsequent years under the contract, the royalty rate would increase to $0.0014 per song play plus 19% of net advertising revenues.
Meanwhile, the minimum royalty rate will consist of 45% of net advertising revenue plus $21.25 for each 1,000 listener hours in the first year and $22.25 for the remainder of the license agreement. The terms are similar to what the majors are getting but not exactly. For example, one major label source has indicated that first-year payment would be $0.001325.
Other instances where Apple doesn’t have to pay labels include any two songs in a listener hour where the performances are either coming from the listener’s matched-music in their cloud locker or a complete-my-album play or a heat-seeker play, whereby that song is one the Apple has agree to promote on behalf of labels.
Apple couldn’t be reached for comment.
