B Story

Recent reports indicate that Apple's plans for launching a customizable Internet radio service have been slowed by difficult negotiations with rights holders -- both labels and publishers. 

At one time Apple had reportedly hoped to make its Internet radio service part of the iPhone 5 launch. When dragging talks with labels and publishers made that impossible, the company planned to launch around Grammy Awards last month. Now The New York Times says Apple won't likely come to market until summer or later.

The company wants to preload an app on iPhones and iPads to deliver customized music streams, free-to-use and supported by its iAds platform.

The New York Post reports that Apple reportedly offered to pay record labels "about 6 cents per 100 songs" -- roughly just half what Pandora pays. ("Songs" here means "performances," that is, a single song streamed to a single listener.) Record labels, which are in most cases the owners of copyright sound recordings, want Apple to pay "at least" the statutory streaming rate of about 21 cents per 100 performances. (Broadcasters pay slightly more than the "pureplay" statutory rate to stream sound recordings.) Some analysts say Apple is learning that it no longer has the negotiating weight it once did when Steve Jobs and the company first launched the iTunes download store.

Apple also needs to negotiate with publishing/composition rights holders. In this area, talks are reportedly snagged by Sony/ATV, which recently withdrew digital rights from ASCAP and BMI (which led to a big increase in what Pandora pays). See more in RAIN here and here.

Read coverage from The New York Times here and the New York Post here.

Lawmakers have made it pretty clear they don't want to hear about webcasting royalties any more -- including the Internet Radio Fairness Act -- before they deal with sound recording royalties for broadcast radio.

Inside Radio reports some radio executives are using the occasion of a conference in D.C. to visit with members of Congress and ask support for the "Local Radio Freedom Act." The non-binding resolution opposes any measure requiring U.S. broadcasters to pay sound recording performance rights (more from RAIN here).

Meanwhile, the record industry group musicFIRST Coalition answered with an ad in Politico (that's the image, full-size here), accusing broadcast radio of being "stuck in the past" (since other forms of radio like satellite, cable, and webcasters pay).

While the record industry publicly cites Internet radio as a paying customer for its copyright licenses, its representatives remain adamantly against measures that would likely bring webcast royalty rates in line with those paid by satellite and cable radio. The IRFA (more here) would require judges to use the same legal standard to determine statutory rates for streaming radio that they use for satellite and cable.

While satellite and cable radio royalty rates are determined using a legal standard known as 801(b), the 1998 Digital Millennium Copyright Act requires Internet radio rates be set using a different standard known as "willing buyer and willing seller." Unlike 801(b), "willing buyer and willing seller" ignores the "real world" ramifications of a rate determination, and all notions of fairness and minimizing industry disruption -- considerations of the 801(b) standard.

So while satellite radio pays about 9% of its revenue to license copyright sound recordings, leading webcaster Pandora pays well over half.

A late-November House Judiciary subcommittee hearing on the IRFA quickly lost focus on the bill as record industry witnesses (and the committee members sympathetic to them) steered the discussion to the AM/FM exemption (our coverage here).

Writing in Huffington Post, musician David Fagin blames the AM/FM exemption for lack of progress on webcasting issues: "Congress is scared to go after big radio and their lobby, and the RIAA is 'just fine' with the status quo. In the meantime, both sides have decided to just kick each other's asses, instead." (More in RAIN here).

Last month in RAIN (here) we reported Federated Media stations were participating in the beta release of a new Abacast technology designed to enable "song skipping" on live radio streams. The technology, called "Hammer," streams another song from the station's playlist when a listener hits the "skip" button during a live broadcast. Abacast says "individualized buffering and insertion functionality" will allow subsequent programming (music, ads, breaks, etc.) pick up seamlessly.

Abacast SVP/Products and Marketing Jim Kott penned a guest column for RadioInfo.com to explain the system further.

Apparently, the system can be "dayparted," meaning a station might want to allow listeners to skip music only during certain segments of the day. Specific songs can be made "non-skippable." And, naturally, "skips" will be tracked and recorded. To minimize royalties, Kott says the system will limit skips, either per-session or per-hour.

Read more from Kott on Abacast's "Hammer" in RadioInfo here.

Monday begins the day-and-a-half Radio Ink Convergence conference at the Santa Clara Convention Center. AccuRadio founder and RAIN publisher Kurt Hanson is scheduled to take part in Tuesday afternoon's "Tech Super Session." Joining him will be Mohr Davidow Ventures (backers of Bandpage) general partner Katherine Barr and Walden Ventures (Pandora, SoundHound) managing director Larry Marcus.

The event's keynote speakers are Draper Fisher Jurvetson managing partner Tim Draper, journalists John Dvorak and Leo Laporte, Westwood One founder (with the new PodcastOne) Norm Pattiz, author and Social Media Explorer/SME Digital CEO Nichole Kelly, consultant and Business Rock Stars co-founder Ken Rutkowski, and DAR.fm and UberTalk CEO Michael Robertson.

Registration info and the agenda are here.

Pandora announced via their blog yesterday they are limiting free/ad-supported mobile listening to 40 hours a month. Found Tim Westergren says it's about royalties.

"Pandora's per-track royalty rates have increased more than 25% over the last 3 years, including 9% in 2013 alone and are scheduled to increase an additional 16% over the next two years," he wrote. "After a close look at our overall listening, a 40-hour-per-month mobile listening limit allows us to manage these escalating costs with minimal listener disruption."

Pandora is the most visible industry player backing the Internet Radio Fairness Act, which they hope will decrease sound recording performance royalties with a change in the standard that's used to determine those rates. See more in RAIN here.

While the webcaster is monetizing mobile audience better than most, its ad revenues are just $26.96 per thousand listener hours on mobile, compared to $56.40 across all platforms.

According to Pandora, only 4% of listeners will be affected, as the average listener streams just 20 hours a month across all platforms. The limit is only on mobile listening, and does not affect paying "Pandora One" subscribers. Free mobile listeners are also given the option of paying 99 cents for unlimited listening for the rest of the month after they hit the limit.

This is not Pandora's time capping free listening. Prior to September 2011, free stream mobile and web listeners were limited to 40 hours per month.

Read the Pandora blog entry here.

Yesterday Albert Fried & Company analyst Rich Tullo appeared on CNBC to discuss the news that record label sales were up last year for the first time since 1999. He used the opportunity to criticize the music industry and its treatment of music services like Pandora -- especially in regards to licensing and royalties.

"The industry is fighting the Pandoras and Spotifys," Tullo told CNBC. Tullo pledged his company "will help (Pandora) in Congress if called upon -- we do have certain beliefs about Internet radio freedom, and how it can be an ultimate good for the industry if the music producers top fighting change."

Pandora and other webcasters support the Internet Radio Fairness Act (more here), designed to make the Internet radio royalties more equitable by bringing the royalty rate determination process in line with those for other non-interactive digital music use (like satellite radio). The recording industry is in staunch opposition to the bill.

Watch video of Tullo's CNBC appearance here.