'iRadio': Great for Apple (AAPL), Bad for Labels? (SNE)
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Apple (Nasdaq: AAPL)) could cash in on an Internet radio service far beyond what labels are expected to draw.
Ahead of Apple WWDC 2013 (which will stream its keynote here), AllThingsD notes that an 'iRadio' platform won't be too lucrative for labels. Like other providers, Apple will pay the labels a fraction of a penny each time a song is streamed, but Apple will also sell ads and give labels a cut of those sales as well.
ATD notes that Apple would have to break into the radio ad business, which isn't something it is too familiar with. The $14 billion industry is more of a localized effort rather than a national endeavor. Pandora (NYSE: P) has been working at it for years and will probably draw about $630 million in ad revs this year. Apple rivals like Yahoo! (Nasdaq: YHOO) and Google (Nasdaq: GOOG) have also attempted to crack the code, but failed and bailed.
So, while Apple is likely paying less than Pandora and Spotify for the rights to broadcast music, sweetening the pot with an ad revs clause, the company is more likely aiming to keep users on iTunes than anything else. The extra layer of "sticky" for the Apple ecosystem will translate to firm hardware sales down the line, while music labels might be left out in the cold by getting half as much in royalties from Apple that were drawn from other Internet radio streaming services.
NOTE: Apple is said to have signed Sony (NYSE: SNE) Entertainment last week, which was the final deal needed to launch the service, sources said.
Ahead of the bell, Apple is up 0.3 percent.
Ahead of Apple WWDC 2013 (which will stream its keynote here), AllThingsD notes that an 'iRadio' platform won't be too lucrative for labels. Like other providers, Apple will pay the labels a fraction of a penny each time a song is streamed, but Apple will also sell ads and give labels a cut of those sales as well.
ATD notes that Apple would have to break into the radio ad business, which isn't something it is too familiar with. The $14 billion industry is more of a localized effort rather than a national endeavor. Pandora (NYSE: P) has been working at it for years and will probably draw about $630 million in ad revs this year. Apple rivals like Yahoo! (Nasdaq: YHOO) and Google (Nasdaq: GOOG) have also attempted to crack the code, but failed and bailed.
So, while Apple is likely paying less than Pandora and Spotify for the rights to broadcast music, sweetening the pot with an ad revs clause, the company is more likely aiming to keep users on iTunes than anything else. The extra layer of "sticky" for the Apple ecosystem will translate to firm hardware sales down the line, while music labels might be left out in the cold by getting half as much in royalties from Apple that were drawn from other Internet radio streaming services.
NOTE: Apple is said to have signed Sony (NYSE: SNE) Entertainment last week, which was the final deal needed to launch the service, sources said.
Ahead of the bell, Apple is up 0.3 percent.
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