Report: Record labels displeased with Apple's streaming royalty rate offer

Posted by Shane McGlaun

Rumors have been circulating for years about how Apple is planning to offer a streaming music subscription service.

While such a service has yet to materialize, some new rumors are making the rounds that seem to indicate a streaming launch of some sort may very well be imminent. 

Indeed, Apple has reportedly opened talks with record labels in an effort to license music for some of streaming platform.

Unsurprisingly, reports claim that record labels are currently unhappy with the royalty rate that Apple is offering. According to reports, Cupertino made an initial offer to record labels for royalty rate of only six cents per 100 songs streamed. Granted, this is an opening offer from Apple and the tech company may be expecting a counter offer from labels.

To get an idea how low the rate offered by Apple is, the next cheapest royalty rate paid by an online music streaming company comes from Pandora at $.12 per 100 songs.

“Apple wants a rate that is lower than Pandora’s,” said one high-level executive.

The royalty rate for iHeart Radio is $.22 per 100 songs streamed while the industry standard royalty rate is $.21 per 100. Record labels reportedly believe that cash-flush Apple should pay at least the industry standard royalty rate of $.21 per 100 songs streamed. Personally, I think the labels will have a hard time selling that argument as Pandora already pays significantly less than the above-mentioned amount.

Then again, things would probably work out just fine for the record labels at six cents per 100 songs, because an Apple streaming platform would likely be the most popular  service available.

Apple probably believes the labels will make up what they lose on the normal revenue rate on sheer volume. According to sources who claim to be familiar with the negotiations, music labels are demanding an upfront fee and a percentage of revenue from ads Apple sells via its streaming music service.