Report: Apple's iRadio stalled by label royalty demands

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Apple's (NASDAQ:AAPL) much-rumored streaming music service remains in limbo as a result of ongoing licensing negotiations with the major record labels, The Financial Times reports.

Sources with knowledge of the discussions said that Apple has completed a deal to offer Universal Music Group's digital catalog via the so-called "iRadio" service. An agreement with Warner Music is said to be imminent, but the third major label, Sony Music Entertainment, is balking at Apple's proposed royalty terms.

Insiders said Apple initially proposed a royalty of about 6 cents for every 100 tracks it streams, but it later raised its bid to about 12.5 cents, in line with the rates paid by Internet radio service provider Pandora. While it is unclear whether Universal has accepted the 12.5-cent rate, the other labels are believed to be demanding even more favorable terms. Apple reportedly is offering labels three tranches of iRadio revenue: Royalties per track streamed, a share of advertising proceeds and a guaranteed minimum sum over the course of the contract in the event the number of plays or advertising sales disappoint.

Apple declined to comment.

Sources have said iRadio will closely evoke Pandora in terms of functionality, eschewing on-demand listening in favor of programming content based on users' favorite artists, songs and genres. Like Pandora, Apple will offer the service via multiple mobile operating systems as well as the desktop. Apple also will add features like the ability to jump back to the beginning of a track and iTunes purchase integration: iTunes is the music business' largest source of digital revenues, generating an estimated $4.3 billion in download sales in 2012--of which $3.4 billion was paid to labels--according to Asymco analyst Horace Dediu.

Rumors of Apple's impending entrance into the streaming music segment have swirled for months. The Wall Street Journal and The New York Times first reported on an Apple streaming radio service last fall--Reuters later reported that Apple CEO Tim Cook and Senior Vice President of Internet Software and Services Eddy Cue had met with Beats Electronics CEO and co-founder Jimmy Iovine to explore a potential partnership involving the audio technology firm's forthcoming Daisy streaming service. Rivals Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN) are reportedly exploring streaming music efforts as well.

For more:
- read this Financial Times article (reg. req.)

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