Warner Music Group Inks iRadio Deal for Publishing, Recorded-Music Licensing

VERY INTERESTING

Warner Music Group on Sunday became the first major record company to sign both a publishing and a recorded music licensing deal with Apple Inc. for the upcoming Internet radio service that many have dubbed “iRadio,” sources say.

Universal Music Group on May 9 also nailed a deal with Apple for a radio streaming service, but rights for Universal’s publishing licenses are still being hashed out. Apple also is still pursuing agreements from Sony Music Entertainment and Sony/ATV.

If Apple succeeds in sealing up all remaining licenses, the Cupertino, Calif., company could announce the service as early as June 10 at its World Wide Developer Conference in San Francisco. Most industry executives knowledgable with the talks are confident Apple will ultimately secure all the rights required to launch a service — the only question is when.

A Warner spokesman declined to comment.

The agreement with Warner calls for Apple to compensate the company at higher rates than what is currently paid by most Internet radio services such as Pandora, which pays rights holders under a compulsory licensing framework set up in 2009 through Congress, according to executives close to the negotiations. The Recording Industry Association of America has been urging lawmakers to reject Pandora’s petition to change the current method for setting royalty rates paid by Internet radio services, which roughly amounts to 0.12 cents per stream.

The agreement calls for two separate deals, one with Warner’s labels and another with Warner/Chappell Music Inc., the company’s publishing arm. Both were negotiated in parallel, an executive close to the talks said.

The recorded music deal calls for Apple to pay a per-stream rate of around 0.16 cents, similar to the rate Universal Music Group received. Like Universal, Warner also gets a percentage of ad revenue that would be generated by the Apple service, but payments would only begin after the service exceeds a certain audience threshold.

For the publishing deal, Warner/Chappell also negotiated an additional percentage of ad revenue that is more than twice the 4 percent rate paid by Pandora.

Finally, the multi-year contracts give Warner a guaranteed minimum amount of money rather than an advance.

Earlier this year, Apple had sought a far lower royalty rate of 0.08 cents per stream, but with a chance to get a larger cut of the advertising revenue Apple would generate from the radio service. Record companies rejected the initial offer, saying Apple’s terms would have put the labels in an awkward position of having to explain to Congress why that was acceptable for Apple, but not for other Internet radio services. So far, the deals with Warner and Universal avoid such a scenario.