Sony deal turns the switch on iRadio plans

Sony Music has agreed terms with Apple for the iPhone-maker’s long-anticipated music streaming service, according to two people familiar with the negotiations, setting the stage for a product known as iRadio to be announced at Apple’s Worldwide Developers Conference on Monday.

Sony had been seen as a possible holdout from iRadio as first Universal Music then Warner Music agreed their own deals with Apple. Both companies declined to comment, but the Sony deal means Apple has signed up all three major recorded music groups in time for next week’s event.

Last weekend, Warner Music’s Warner-Chappell division also became the first of the music publishing companies to sign up to iRadio, and Sony ATV and Universal Music Publishing are expected to follow suit.

Although music industry members now expect Apple to announce iRadio as it gathers its top developers, it is not clear that it will be ready to launch the service immediately to consumers.

There were no initial details on the terms which Sony had agreed, but Apple is said to have greatly improved on its early offers to music companies that were anxious to set a positive precedent for the future economics of digital music.

Under the deal Universal Music struck for iRadio in May, the recorded music market leader is understood to have secured a one-off payment as well as a royalty of about 12.5 cents per 100 tracks streamed, a share of advertising revenue, and a guaranteed minimum sum over the two-to-three-year deal.

Apple has offered music publishers 10 per cent of advertising revenue, meanwhile, at least double the 4-5 per cent rate the largest publishers currently earn from Pandora, the US-based internet radio service with more than 70m “active listeners”. Shares in Pandora fell at the start of the week on news of Warner Music’s deals for the rival iRadio.

The improved terms, negotiated by Eddy Cue, who oversees Apple’s iTunes store, App store and iBookstore, have reinforced Apple’s reputation as one of the music industry’s most important digital partners, a decade on from labels’ clashes with Steve Jobs over iTunes’ plan to price music at 99 cents per track.

“They have tremendous distribution and engagement with music and a tremendous understanding of music consumers that many others don’t,” one music executive said.

Google beat Apple by launching its own “All Access” subscription service in May, and music companies have been pleased by the rapid growth of newcomers such as Spotify. But labels and publishers have particularly high hopes for iRadio because it will use people’s iTunes collections to predict music they will want to hear, and make it easy to buy downloads of tracks they enjoy.

(Published by Financial Times – June 7, 2013)