Apple Inc. (NASDAQ:AAPL) signed a deal with world's No. 3 major music label, Warner Music Group and its publishing arm as it prepares to launch its free Internet radio product at WWDC, reports Paul Sloan of CNET citing sources familiar with the negotiations.
Apple Launching iRadio Service at WWDC:
The agreement reflects the efforts made by Apple Inc. (NASDAQ:AAPL) to launch its so called iRadio service at its Worldwide Developers Conference that will start from June 10.
As per the source, Warner Music Group is the first major deal for both recorded music and publishing. The deal offers better terms for the music labels and publishers, when compared to what they get from a close rival, Pandora Media Inc (NYSE:P).
However, there have been no comments from the company yet.
Alliance with Apple, much more profitable
Owing to Apple Inc. (NASDAQ:AAPL)'s mammoth size, and plans by the Cupertino based company to launch the service globally, are reasons enough to make the labels happier. However, Apple is also offering two more potential revenue sources. Apple Inc. (NASDAQ:AAPL) plans to create its own ad business, which includes adding audio ads similar to that available on Pandora's free service.
The product from Apple Inc. (NASDAQ:AAPL) will also be for mobile devices with a linking to iTunes. So, as per the sources it is expected to have some extra features like rewind a song from the middle or allowing a user to purchase a song by pressing a simple button. This again will benefit the labels as currently they collect around 70 percent of a dollar spent of purchasing through iTunes. Presently, Pandora Media Inc (NYSE:P) has only 70 million active users compared to about 500 million iTunes accounts.
In some of the earlier negotiations, the labels agreed on Apple Inc. (NASDAQ:AAPL) paying a per-stream rate, which is half of what is paid by Pandora Media Inc (NYSE:P). However, sources now reveal that the rates have changed, and now Apple is paying a similar or even a higher rate paid by Pandora.
Even for the publishers, the current deal is getting them more than twice the ad share revenue they get from the deal with Pandora.
Apple's previous deal
Last month, the iPhone maker concluded a deal to license music with the world's largest label, Universal Music. Also, with Sony, negotiations are still going on over some of the features built into Apple Inc. (NASDAQ:AAPL)'s product.
Google a threat
The streaming music segment is witnessing a lot of actions these days. Last month, Google Inc (NASDAQ:GOOG) unveiled a subscription music service called Google All Access similar to that of Spotify. Google is also planning to come up with a music service connected to You Tube, which is becoming an increasingly popular place for listening music.