Apple has reportedly struck a deal with Warner Music to carry its content on a streaming audio service. It means the company has two of the three big record groups on board, just in time for an expected launch next week.
The service, most likely to be called iRadio, looks set to be among the flagship announcements at Apple’s Worldwide Developers Conference next week. That creates big pressure to reach an agreement with Sony, the remaining major holdout after Universal already made the deal.
While the various parties involved haven’t spoken publicly about the terms of the deal, it looks like the record labels may be coming out on top, most likely because Apple knows it needs all of the big three on board to make a good first impression on customers.
It appears that Apple has failed to persuade the record labels that the size of its potential audience means they should agree to take a lower royalty rate for each song played than they currently get from other streaming services. Apple is also said to be giving Warner 10 percent of the relevant ad revenue, well above the industry norms.
According to the Wall Street Journal it’s not just the payment rates that have delayed the Warner deal and meant the Sony negotiations are still ongoing. There’s also been dispute about Apple’s proposal that it only split ad revenue above a certain total, while the record labels want extra compensation for any Apple doesn’t carry ads on the service, which may well be the strategy in the first few months.
This isn’t to say the record labels aren’t very keen to make a deal with Apple. Not only is it likely their biggest potential audience for streaming royalty revenues, but the Apple system looks set to include a one-tap option for buying and downloading the track that’s currently being played, something that could boost sales revenue.
The real question is whether the negotiating positions are being influenced by any perceived deadlines. While Apple wanting to launch at WWDC makes sense, it’s not like it can’t call a well-covered press conference at any time, so it would seem very out of character for the company to cave in on negotiations.