Google and Amazon can follow Apple's example should they choose to launch their own radio services. Apple’s upcoming Internet radio service, unofficially dubbed iRadio, will differ from Pandora in how the music is licensed and the features embedded in the service. These differences will give iRadio a chance to differentiate itself from early movers in the United States and establish itself in other countries.
Warner Music Group Inks iRadio Deal for Publishing, Recorded-Music Licensing
Apple has reportedly agreed to pay a per-stream royalty above what Pandora pays as well as a percent of advertising revenue (an undisclosed minimum amount of advertising revenue will be guaranteed). Apple's per-stream royalty of 0.16 cents per stream is 33% higher than the 0.12 cents per stream Pandora currently pays for its free, ad-supported service under the Webcaster Settlement Act of 2009. (It pays 0.22 cents per stream for listening activity on its paid, subscription service.)
A large corporation like Apple has two options to operate a statutory service; either pay the rate under the Webcaster Settlement Act, or pay the rates issued in 2011 by the Copyright Royalty Board. Large, multinational corporations are effectively shut out of the former option. The Webcaster Settlement Act would require that Apple pay the greater of 25% of gross revenues or a per-stream royalty. Apple's $170.8 billion in revenue in its last four quarters would require it to pay $42.7 billion to SoundExchange. The rate given to Pandora is meant for smaller, standalone services, not huge corporations.
The other option is to pay the rates established by the Copyright Royalty Board in 2011. A commercial webcaster pays a per-stream royalty of 0.21 cents (that increases to 0.23 cents in 2014 and 2015) but is not beholden to the "greater than" clause of the Webcaster Settlement Act.
Apple elected to forgo both options. It figured it could pay roughly the same amount -- maybe less -- without the restrictions placed on statutory webcasters. Besides, Apple could have operated a statutory service only in the United States. Operating a radio service in any of the other 118 countries in which iTunes is available would require negotiating licenses directly with rights owners.
A webcaster that operates a statutory service faces a number of restrictions, including the number of times a listener can skip a song per hour, how many songs from a particular artist or album are played in a three-hour period, visibility of upcoming songs and, most importantly, the ability to choose a particular song by a particular artist. Since Apple is paying to negotiate licenses, expect iRadio to be free of one or more of these restrictions.
iRadio will operate globally because Apple has opted to negotiate direct licenses. Pandora operates in three countries: the United States, where a webcaster can utilize the compulsory license, and two countries where it has negotiated licenses, Australia and New Zealand.
If Google or Amazon decides to launch a webcasting service in the United States, they could opt for the Copyright Royalty Board rates. Or they can follow Apple's lead and license directly with rights owners to create a more feature-filled service. Although a multi-national corporation will not be able to enjoy the lower rates paid by pureplay services like Pandora, it will be able to operate globally and won't have the restrictions placed on statutory services. If money is not the biggest hurdle -- Apple, Google and Amazon have plenty of it -- direct licenses allow a company to better compete with existing standalone services.
Warner Music Group Inks iRadio Deal for Publishing, Recorded-Music Licensing
Apple has reportedly agreed to pay a per-stream royalty above what Pandora pays as well as a percent of advertising revenue (an undisclosed minimum amount of advertising revenue will be guaranteed). Apple's per-stream royalty of 0.16 cents per stream is 33% higher than the 0.12 cents per stream Pandora currently pays for its free, ad-supported service under the Webcaster Settlement Act of 2009. (It pays 0.22 cents per stream for listening activity on its paid, subscription service.)
A large corporation like Apple has two options to operate a statutory service; either pay the rate under the Webcaster Settlement Act, or pay the rates issued in 2011 by the Copyright Royalty Board. Large, multinational corporations are effectively shut out of the former option. The Webcaster Settlement Act would require that Apple pay the greater of 25% of gross revenues or a per-stream royalty. Apple's $170.8 billion in revenue in its last four quarters would require it to pay $42.7 billion to SoundExchange. The rate given to Pandora is meant for smaller, standalone services, not huge corporations.
The other option is to pay the rates established by the Copyright Royalty Board in 2011. A commercial webcaster pays a per-stream royalty of 0.21 cents (that increases to 0.23 cents in 2014 and 2015) but is not beholden to the "greater than" clause of the Webcaster Settlement Act.
Apple elected to forgo both options. It figured it could pay roughly the same amount -- maybe less -- without the restrictions placed on statutory webcasters. Besides, Apple could have operated a statutory service only in the United States. Operating a radio service in any of the other 118 countries in which iTunes is available would require negotiating licenses directly with rights owners.
A webcaster that operates a statutory service faces a number of restrictions, including the number of times a listener can skip a song per hour, how many songs from a particular artist or album are played in a three-hour period, visibility of upcoming songs and, most importantly, the ability to choose a particular song by a particular artist. Since Apple is paying to negotiate licenses, expect iRadio to be free of one or more of these restrictions.
iRadio will operate globally because Apple has opted to negotiate direct licenses. Pandora operates in three countries: the United States, where a webcaster can utilize the compulsory license, and two countries where it has negotiated licenses, Australia and New Zealand.
If Google or Amazon decides to launch a webcasting service in the United States, they could opt for the Copyright Royalty Board rates. Or they can follow Apple's lead and license directly with rights owners to create a more feature-filled service. Although a multi-national corporation will not be able to enjoy the lower rates paid by pureplay services like Pandora, it will be able to operate globally and won't have the restrictions placed on statutory services. If money is not the biggest hurdle -- Apple, Google and Amazon have plenty of it -- direct licenses allow a company to better compete with existing standalone services.