Apple reaches iRadio deal with Warner Music, suggesting WWDC launch

Apple signs up the world's No. 3 major music label, leaving Sony as the only holdout, as it seems to be aiming to launch at WWDC.

Paul Sloan Former Editor
Paul Sloan is editor in chief of CNET News. Before joining CNET, he had been a San Francisco-based correspondent for Fortune magazine, an editor at large for Business 2.0 magazine, and a senior producer for CNN. When his fingers aren't on a keyboard, they're usually on a guitar. Email him here.
Paul Sloan
2 min read
Sarah Tew/CNET

Apple struck a licensing deal Sunday with both Warner Music Group and its publishing arm, Warner Chappell, bringing Apple's free Internet radio product that much closer to launching, according to sources familiar with the negotiations.

The deal suggests that Apple is working hard to unveil what's been dubbed iRadio at its Worldwide Developers Conference, which begins June 10.

Apple spokesman Tom Neumayr declined to comment.

Warner is the first of the major labels to reach deals for both recorded music and publishing, sources say.

Apple last month reached a deal to license music from Universal Music, the world's largest label, and negotiations are still going on with Sony, which has been going back and forth with Apple over some specifics about features built into Apple's product.

The deals reached so far offer far better economics for the music labels and publishers than what they get from Pandora, the product that most closely resembles iRadio.

Earlier in the negotiations, the labels had agreed to let Apple pay a per-stream rate that was half of what the labels get from Pandora. That changed, however, and sources now say that the deals have Apple playing the same rate as Pandora, or even higher.

While that alone could be lucrative because of Apple's sheer size -- and Apple plans eventually to roll this service out globally -- the hope for the labels is much bigger because it comes with two other potential revenue sources. Apple has told the music labels that it plans to build out its ad business, including potentially adding audio ads such as those heard on Pandora's free service.

The product, which would be tied to iTunes, would be made for mobile devices. It would contain some features not available on Pandora -- such as the ability to rewind a song from the middle of it, sources say -- and would have a simple button that would let users easily purchase a song. This, too, could be a boon to the labels, which collect roughly 70 percent of every dollar from an iTunes purchases. Currently, there are about 500 million iTunes accounts; Pandora, by contrast, has about 70 million active users.

As for the publishers, sources say that the deal on the table -- and presumably the one signed by Warner Chappell -- gives publishers more than twice the ad share revenue they currently receive from Pandora.

The streaming music field is getting super competitive. Google, at its developer's conference last month, launched a Spotify-like, subscription music service called Google All Access. Google is also working on a music service tied to YouTube, which has become the dominant place where young people go to hear music.