Apple Inc. (NASDAQ:AAPL) is never one to talk about any new products or services until it is ready to talk about them. But it seems to be common knowledge by now that Cupertino is working on a streaming-music service that would rival similar digital platforms like Spotify and Pandora Media Inc (NYSE:P). Apple has definitely been looking to expand its business model into all things digital (with apologies to our blogging brethren at the similarly named site), and having an opportunity to complement iTunes with a streaming-music service seems like a natural progression. And one could expect that Apple won’t get in the segment just to get in; it will be looking to establish an innovative, dynamic customer experience. It’s for the brand, you know.
With that in mind, Apple Inc. (NASDAQ:AAPL) could be close enough to launching the “iRadio” service at any time, because it does have a couple of major music distributors under contract or about to sign on, which would be a good start for the service. But alas, this is Apple – no jumping in until it’s truly ready. And apparently it is not ready yet because Apple is running into a snag with Sony, which is one of the heavyweights in music distribution and licensing. Apple already has a deal with Universal Music Group and is finalizing the wording on a contract with Warner Music. Two outta three ain’t bad, right?
It ain’t bad, but it ain’t Apple Inc. (NASDAQ:AAPL) good enough, it appears. Sony seems to be holding out for more royalty and licensing money – reports are that the company is looking at the long-term potential popularity of the service and wants to get its share early rather than being locked into a low figure just because the service is starting out and there are no guarantees of success. Apparently Sony trusts the Apple brand to deliver, and it is challenging Apple to trust itself. The report had said that Apple was looking to do a three-tier compensation plan for these distributors, which mean it felt it could offer a lover royalty rate of about 5 cents for every 100 tracks played- which would be about half what Pandora Media Inc (NYSE:P) is currently paying.
Apparently, though, Sony believes Apple Inc. (NASDAQ:AAPL) will be capable, due to reputation and brand, of doing far better with its service than Pandora or Spotify can do, so it has Apple raising its royalty into an area that is competitive with Pandora – around 12.5 cents per 100 tracks. Talks are ongoing, but it seems pretty clear based on Apple’s past dealings that if it does not secure a deal with Sony, iRadio as it’s known may not see the light of day.
What do you think? Would you support an Apple Inc. (NASDAQ:AAPL) music-streaming service? How do you think Apple could innovate in this space and take over market share? Let us know your thoughts in the comments section below.