Apple’s Online Radio Service to Challenge Pandora in 2013
Apple Inc. (AAPL) has intensified talks with major music labels to start an advertising supported streaming-radio competitor to Pandora Media Inc. (P) by early next year, according to people with knowledge of the negotiations.
Discussions are centered in part around how to share ad revenue and a deal could be reached by mid-November, with Apple starting service in the first three months of 2013, said the people, who sought anonymity because talks are in progress.
With sales of music downloads slowing, Apple and record companies want to create new ways for customers to discover and buy digital music. To challenge Pandora, Apple is seeking licensing pacts with labels that allow more flexibility about what listeners hear. Pandora, the Internet radio leader, relies on a compulsory license that limits how often users can skip tracks and how many times an hour an artist can be played. Apple is also pushing for earlier access to new releases.
Executives from Vivendi SA (VIV)’s Universal Music Group, Warner Music Group, and Sony Corp. visited Apple’s headquarters in Cupertino, California, in recent weeks to learn more about its radio plans, the people said. Apple, the world’s biggest music retailer with more than 400 million iTunes accounts, wants listeners to be able to buy tracks as music streams or revisit what they’ve heard in auto-generated playlists, they said.
Apple is looking to create an app tailored for its iPhone, iPad and iPod Touch, the people said. They said it won’t be focused on delivering music through a Web browser. Apple’s negotiations with record labels have centered around advertising, the people said. In addition to an upfront fee, record companies are seeking a percentage of ad sales and the ability to insert their own commercials for artists, they said. Apple sees the service as a way to grow its iAd mobile advertising platform, and is exploring ways to integrate iAd with iTunes to steer customers back to iTunes.
Source: Bloomberg
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