Apple's 'Pandora Killer' Halted By Licensing Complications With Sony/ATV

Apple’s rumored Pandora-like music streaming service has run into a licensing roadblock, derailing a launch that reportedly was scheduled to coincide with the iPhone5’s debut. According to information obtained by the New York Post, Sony/ATV (the world’s largest music publisher) wanted Apple to pay a higher fee for each song played on its service than the Cupertino-based company was willing to pay. In contrast to Pandora and others who pay publishing royalties on a statutory and tenths of a penny rate, Apple is instead looking to establish a more complex and direct payout method.

Part of this licensing complexity stems from the fact that Apple’s streaming licenses would allow their service to play a “selected artist more times” than Pandora can under the statutory agreement, according to the New York Post. Additionally, Apple needs more flexible licenses considering that it will be pointing people directly to its iTunes store to generate sales.

This rejection from Sony/ATV to Apple comes as the publisher recently announced that they are pulling out of both ASCAP and BMI in January (digital only), which means that Pandora and others will only find more difficulty in negotiating future rights deals. Now with EMI under its umbrella, Sony/ATV is said to administer two million copyrights from artists like Taylor Swift, One Direction, The Beach Boys and The Beatles.

Apple is also working to become a more favorable potential revenue generator for labels. In contrast to Pandora, which delivers songs based on algorithms, Apple is reportedly talking to a number of labels to include an element of promotion based on what they are pushing in any given month. This is certainly an interesting move considering that labels aren’t typically impressed with revenue generated from streaming services that work under the standard statutory rate like Pandora. In fact, many believe that these services cannibalize music sales. Regardless of what labels think of streaming services as viable income generators, they're likely going to go along with whatever Apple has in store anyway considering how massive of a reach and user-base the tech giant has.

Should these talks with rights holders not go through, it is worried by some (mainly publishers) that Apple will launch under the same statutory rate that Pandora pays, leaving little profit potential. Negotiations are said to be ongoing at this time, and we'll be sure to keep you updated as more develops.

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Hisham Dahud is a Senior Analyst for Hypebot.com. Additionally, he is the head of Business Development for Fame House and an independent musician. Follow him on Twitter: @HishamDahud