Apple will pay significantly more in royalties to music companies for iTunes Radio than music-streaming rival Pandora currently does, The Wall Street Journal reports. The Cupertino-based company’s incoming online radio service will pay record labels royalties based on a combination of the number of songs listened to as well as advertising revenue.
For the first year, Apple will pay 0.13 cents for each song played to the respective label. The company will also divide 15 percent of net advertising revenue among labels proportionally based on the number of songs played. In its second year those numbers will increase to 0.14 cents per song and 19 percent of ad revenue. Meanwhile, Pandora pays just 0.12 cents per song played and half as much in total royalties.
Responding to the unflattering comparison between the music streaming services, Pandora founder Tim Westergreen argued that the two programs work different and offer different features, which are reflected in their varied royalty terms.
“It’s apples and oranges,” Westergreen told WSJ.
There are a few key differences in Apple’s terms that may have been hard for record labels to accept. The company won’t pay any royalties for songs the listener already owns or that appear on an album if the user owns even a single track from it. The same applies to specially promoted “Heat Seeker” tracks, and to any songs the listener skips within 20 seconds of play. However, Apple is only exempt from paying royalties for up to two songs per hour for each user.