In September, The Wall Street Journal reported that Apple was in licensing negotiations with record labels to create a Pandora-like music service. The next day, the New York Post reported that talks were hung up over licensing fees.
It seems likely that these negotiations are playing themselves out in the press, as well as behind boardroom doors.The negotiations are ongoing so the terms could change, but the sources said Apple has offered to pay a lower royalty rate than Pandora pays even though it wants to provide iTunes users with the ability to do more with the music than Pandora's customers enjoy. Pandora, the leading Internet radio service, pays a statutory rate set by Congress. Under the terms of this rate, Pandora must limit the way users interact with songs, such as capping the number of times they can listen to the same song or an individual artist.
In exchange for this greater flexibility with songs, Apple is offering a percentage of the ad sales generated by the service. CNET's sources say that some of the sector's leaders don't believe the cut Apple put on the table is big enough. Others in the music industry, however, argue it's good for the overall business if Apple takes on Pandora.
Article Link: Music Labels Downplay Imminent Launch of New Apple Music Service