Apple Music-Streaming Service: Is Apple Being Cheap with Record Labels?

Apple Music-Streaming Service: It is no big surprise that Apple Inc. (NASDAQ:AAPL) is interested in forming relationships with record labels as a means of providing a music-streaming service. While this is something the Cupertino-based company would love to get involved with, there are reports that they are being entirely too cheap to make a deal happen at the present time.

Apple Inc. (NASDAQ:AAPL) is actually the smart money’s second favorite publicly traded company but hedge funds have started dumping Apple in favor of a surprising financial stock (see which stock hedge funds are buying like crazy).

According to a report by the New York Post, the company “made an initial offer to the label of about 6 cents per 100 songs streamed.”

If you are unsure of how that weighs in, as compared to other deals, it is half of the 12 cents that Pandora pays. As you know, Pandora is the primary service that Apple Inc. (NASDAQ:AAPL) would be competing with.

The question is: what makes the company think that 6 cents per 100 songs is alright when Pandora is paying twice as much? Does the company believe they deserve this low rate for no good reason?

The article goes on to add the following:

“While the labels would admit Apple’s music service could tap a whole new revenue stream for them, they are loath to say yes to the offer as the industry is fighting on Capitol Hill to prevent Pandora from lowering its current rate, sources added.”

“Music label insiders suggest Apple — which is sitting on a cash hoard of roughly $137 billion — ought to pay at least the rate set by the Copyright Royalty Board, or about 21 cents per 100 songs streamed.”

Rich Greenfield, media analyst with BTIG, knows a thing or two about this space and he added the following information:

“People spend two hours a day listening to radio. Google, Apple and Amazon are fascinated by the opportunity to get into music in a bigger way. Pandora doesn’t make any real money.”

Right now, nobody knows if Apple Inc. (NASDAQ:AAPL) will be the company to step in and challenge Pandora. However, if they are to make a deal they may need to become more flexible with the financial details.

Check back here for more updates on Apple Music-Streaming Service.

DISCLOSURE: I have no positions in any stock mentioned.

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