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Apple’s Pandora-like service rejected by music publishers

Pandora would have seen its rival sooner as early as last week if negotiations between Apple and Sony/ATV had not failed, a report said.

The Pandora-like service was not launched together with the release of iPhone 5 as Sony/ATV, owned by Sony and the estate of Michael Jackson, failed to agree on pricing that can be played, according to a published report from the New York Post.

Apple announced earlier this month that a music service like Pandora was in the works to allow users to stream music via an online radio functionality. A music distributor usually will pay only the statutory rate set for playing songs on the Web radio and will not need to reach an agreement with individual rights holders. Pandora is using this scheme.

However, Apple hopes to do more than what the statutory agreement stipulates, demanding from Apple to arrange a special licensing deal. Basically, the iPhone maker wants to allow its users to play a “selected artist more times” than what is allowed for Pandora than what the statutory agreement covers, said the Post.

Industry sources and experts think music labels are not that enthusiastic about how Pandora works. The service does not bring in a lot of revenue for the music labels, and many managers believe that the service cannibalizes sales. They welcome Apple’s bid to enter the market to bring in more dollars.

This makes Apple’s plan an easy model to accept for music labels. It is clear that Apple intends to make money by streaming music and right now, it is more beneficial for them to get aboard the Cupertino giant’s plan than oppose it. Industry insiders revealed that Pandora has a Buy Now button that nobody uses.

Potentially profitable as it may seem, music publishers still share some reservations about Apple’s aggressive behavior like the 2010 event, when the company bypassed them in initial negotiations during Apple’s attempt to showcase song samples.  The music companies threatened to sue Apple after it planned to extend song samples at a media event unless Apple reached a fee deal with them.

Additionally, music label don’t want Apple to launch a similar service to Pandora. If an agreement could not be reached with Apple, it push the company’s leaders to just pay the statutory rate, like what Pandora is paying right now. Such a scheme will not be beneficial for both parties although Apple has the advantage of waiting for the publishers out. This can translate to less money for music publishers than what they are getting right now.

The new iOS 6 has reportedly just recently allowed music streaming in its iTunes Match, just like what Amazon is doing with its Cloud Player, which does not demand from users to download the tracks to listen to them.

source: cnet