Apple Inc. (NASDAQ:AAPL) has revealed details about a deal it has entered into with independent record labels for its upcoming iTunes Radio service. One of the reports claims that the deal will be more alluring than similar offers from Pandora Media Inc (NYSE:P).


Details of the Agreement

The Wall Street Journal reported that Apple Inc. (NASDAQ:AAPL) has conveyed the terms to independent record labels in the previous week. The terms included per-play rates, royalties and ad revenue, for which Apple Inc. (NASDAQ:AAPL) is expecting to pay for the content access.

The Cupertino-based company has decided that for the first year of iTunes Radio, it will pay 13 cents every time the song is played, and it will add 15 percent of net advertising to that. For the second year, rates will be increased to 14 cents for playing songs and 19 percent of ad revenue.

According to The Wall Street Journal, the terms are same as offered to big companies Universal Music Group, Warner Music Group and Sony Music Entertainment. It is expected the “Big Three” will receive the cash beforehand.

Apple Deals Better than Pandora

When compared to Pandora Service, which pays 12 cents for each song played, Apple Inc. (NASDAQ:AAPL)’s seems to be more interesting. Additionally, it is expected that Apple will pay more than double the royalties compared to Pandora.

The announcement regarding Apple iTune Radio was made by Apple during the Worldwide Developers Conference in June. Apple announced that iTune Radio will be an ad-supported service and will be launched this fall on iOS 7 devices—Macs, Apple TV and Windows machines. A customization station similar to Pandora will be included in the service with an advantage that the songs from a user’s previous purchases can be tracked to facilitate personalization.

Points Not Included

The points that are not included in the agreement are royalties on those tracks, which are already in the iTunes library of the user along with “Heat Seeker” content to be selected by Apple for promotions. Songs which listeners do not listen to within the first 20 seconds, with a limit of two songs per hour per user, will also be exempt.

Sources who have insight into the matter said that iTunes Radio is being used by Apple Inc. (NASDAQ:AAPL) to sell songs through the iTune music store, along with iPhone and iPod.