Apple's iTunes Radio Arrives Later, But Pays Indie Labels Better

It seems that if Apple can't get there first, it can at least put some pressure on its competition. After announcing iTunes Radio, a Pandora-like streaming radio player that Apple is adding to iTunes, with all major music labels signed on, the Cupertino company has reportedly been reaching out to indie music labels with a better bargain than Pandora offers.

According to a report in the Wall Street Journal, Apple has circulated terms to indie record labels in recent days, based on the number of plays songs get and the ad revenue that Apple gets, and the terms look better than Pandora's.

In the first year, independent record companies will get 13 percent of a cent for each play a song gets. In the second year that amount will go up to 14 percent of a cent per song. On top of that, 19 percent of the ad revenue generated by those song contributions will go to independent record companies, too.

Apple's offer out-bids Pandora by one percent in the first year, and two in the second, as Pandora only pays 0.12 cents per listen on its radio service. And according to the Wall Street Journal's report, Apple is offering music publishers more than twice the royalties as Pandora currently offers.

Apple does not have to pay for songs played that are already owned by iTunes users in their libraries. In addition, songs involved in special promotions also come royalty-free, as well as songs that listeners skip - defined as a song that the listener skips past within the first 20 seconds of the song's playing, which is a feature that free iTunes Radio users can only use twice per hour.

Not all the specifics of the terms for the major record companies are known, but before Apple's WWDC this year, it did leak that Apple agreed to pay 10 percent ad revenue to Sony Music Entertainment, Universal Music Group, and Warner Music Group, which the three companies are considering an introductory rate, to be higher in the future. The Wall Street Journal said Wednesday that the terms for independent music labels "are similar but not identical are similar to those given to the three major record companies."

Pandora's founder spoke to the Wall Street Journal saying that comparing Apple's terms with music publishers to Pandora's is not reasonable, as the two music listening services work differently. "It's apples and oranges," said Tim Westergren, Pandora's founder.

iTunes Radio is a little different from Pandora's service. iTunes Radio is mostly an add-on to the iTunes player/store complex, and it has likely incorporated in order to help spur music discovery and more purchasing of content through the iTunes store (as well as to contribute to iPhone and iPod sales). Users will be able to buy tracks they like in the iTunes store with a click.

Still, Pandora must be feeling a little of the heat from Apple's move into a very similar realm, because lately Pandora has added features to give its more than 70 million listeners more access to their service, including introducing a new web app that works on all connected home theater devices, such as smart TVs and the Xbox 360.