We’ve Looked At The iTunes Radio Contract, And Apple Is One Sly Negotiator
We've seen at a full copy of the iTunes Radio contract that Apple is circulating to independent labels and can confirm that for the first year, they are offering a "take it or leave it" $.0013 per "royalty bearing performance" plus 15% of net advertising revenue. Depending on the source, that's relatively comparable to the rates** that Apple is paying the majors, despite headlines to the contrary. But for both indie and major labels, the devil is in the details.
How Apple Cut Royalty Payments By 10-14%
** Indie label royalties rise ot $0014 in year two plus 19% of ad revenue, and various sources peg payments to the majors at between $00135 and $.0016 plus ad revenue
Where the sly negotiators at Apple broke new ground is their list of exceptions that help define a "royalty bearing performance". Apple will not pay any royalties:
- during the 120 day beta period
- "Heat Seeker" promotions approved "at iTunes discretion"
- "Complete My Albums" plays defined as "a Performance of a sound recording identified for a given Listener or a Remaining Track" and rendered for such Listener in order to promote the relevant CMA offer".
- Listener Matched Content – songs that are already in the users collection.
It's the last category- Listener Matched Content – that will likely reduce payments labels and artists the most. According to the agreement, Apple does not have to pay for for up to two songs per hour of iRadio play if the tracks appear in the users cloud collection.
Since the heaviest users will likely pick iRadio streams that match their tastes, Apple may have effectively cut royalty payments by 10 – 14%.***
*** 14-15 4 minute songs per hour plus commercials less 2 'free' Listener Matched Content tracks.