A streaming radio service from Apple has always seemed to be a logical thing for the company to do. They've got all those users of their hardware, they've got all the relationships with the music companies through iTunes, so why not? There has though been one sticking point. Given that we're now being told that iRadio is on the way it would appear that they've overcome that one problem. The problem being of course, how in heck do we make it profitable? Negotiations between Apple and record companies regarding Apple's rumored 'iRadio' music service are progressing, The Verge reports as one tidbit in a larger article about the music industry in general. OK, so what is said there about those negotiations? Much has been written about Apple's plan to launch a Pandora-esque service this year. Now multiple music industry insiders have told The Verge that significant progress has been made in the talks with two of the top labels: Universal and Warner. One of the sources said "iRadio is coming. There's no doubt about it anymore." Apple is pushing hard for a summertime launch. The big question though is, well, how do you make such a service profitable? The New York Post reported last month that Apple wants to pay 6 cents per 100 song streams. According to the Post story, Pandora currently pays under the statutory rate 12 cents per 100 spins. By comparison, Spotify pays as much as 35 cents. Maybe the record companies will agree to that, maybe they won't. But that is indeed the basic problem with such radio streaming services at present. They've very like the early internet companies, losing money on every transaction and hoping to make it up in volume. They simply cannot (at present at least) attract enough advertising at a high enough rate to pay for those music royalties. Thus they just cannot make money. If Apple can break this logjam by getting the royalty rate down then it could be a very profitable business for the company. For as Spotify and Pandora have both shown there's a decent enough demand for such music streaming services. It's just that the cost of the inputs is too high at present for them to work economically. Get those input costs down, something Apple might be able to do given its heft and weight in the marketplace, and voila, a nicely profitable opportunity.
No comments:
Post a Comment