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

AppleSonyApple’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.

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

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