ITUNES RADIO: ANOTHER FORK IN THE STREAM

Tomorrow, two things happen. Apple will debut iOS7, and with it, iTunes Radio.

You might say another music streaming service is pointless. We’re already spoilt for choice with the providers, the formulas they have and deals on offer pretty much covering all the bases. If you pay for one premium service for commercial-free peace of mind and subscribe to a couple of freebies too it’s hard to imagine any piece of music being beyond your reach. It would need to be a ‘big player’ in a true sense to come in swinging, before we’d take any notice. Like Apple.

Really, how could Apple not get serious about internet radio? It enjoys a vast, default audience with its iOS embedded in so many Apple devices — an audience getting rapidly larger. There are currently just under 7.2 billion people on the planet now — give or take the 90 births and 40 deaths that occurred during the minute it took to close all the pop-ups and actually see the data — and Apple has sold 600 million iOS devices. It’s a bedrock for new services. And the release of iOS7 will provide another sales-adrenalin shot in the arm.

Typical of Apple, from the get-go it’s shooting for more than its fair share of the music streaming business, attempting to quickly attract more music labels and performers by dangling an apparently larger royalties carrot than the competition.

The issue of music streaming royalties is a hot one with musicians arguing they’re getting the thin end of the wedge. Those iOS device sales figures above in part explain, although maybe not justify, the infinitesimal royalties being paid, so don’t get too excited about any Apple largesse. It’s a numbers game designed to work with a potentially enormous amount of users — around that 600 million to be not-so-exact. Being at the top of the streaming service tree can provide a handy return, which will persuade the higher-profile artists to jump on for the ride. Lesser-known musicians still get a pittance, because they’re hardly a blip on the playlist radar, but Apple has a tasty treat for tempting these performers into the fruit store, too.

For a start, Apple is offering that higher royalty payment. Again, on face value being something like 1 percent of one cent per play no one’s going to order a new yacht anytime soon, but when you’re crunching numbers in the hundreds of millions it gets that little more attractive. By contrast, Pandora, one of the oldest services has only just tipped 200 million users, and Spotify has around 24 million active users.

Apple will also share a greater percentage of its revenue made by iTunes Radio among the record labels. This is where the whole music streaming royalties thing gets confusing. The artists are rewarded with a slice of the revenue pie — the money earned through advertising — and Apple is handing out 15% in the first year and 19% after that. What’s not so clear is how much Apple’s iAds will be charging for ads, or how the move from display to audio ads will go. With its iHooks firmly planted in each one of those 600 million users, the targeting possibilities will certainly be worth more. But whether Apple has the want to go scratching for local ads, which make up the bulk of radio advertising, is yet to be seen.

The real iTunes Radio bonus for record labels and musicians both famous and unknown will be a Buy button that displays with every song being streamed. Purchasing a song for 0.99 cents is the royalty equivalent of around 70,000 streams (of course, you don’t get the whole 99 cents) and the potential for instant, impulse-buying of a cool tune, regardless of who is performing it, is something no other music streaming service can provide with such iTunes ease. This could be a deal-maker for many artists.

Otherwise, from an audience perspective, iTunes Radio isn’t offering anything spectacularly new. Custom playlists, radio station genres and song suggestions culled from your own listening habits are all there, plus integration with your existing music library, all provided in an Apple kind of way which makes them novel, but not so unique. At the moment there’s been no information provided about the quality of the music stream or whether higher bit-rates may be available for those willing to pay for it.

For record labels and musicians it’s likely that iTunes Radio will immediately be on their must-negotiate lists. The Apple brand demands that anyway, without the tempting added extras. However, maybe everybody should take a breath, step back and see what happens. Because that’s what Apple will be doing. There’s going to be a 120-day beta period where no royalties will be paid and, no doubt, all bets are off. Who knows what tweaks to the system Apple may apply at the end of those three months? If you can’t wait, you might want to check the fine-print on the side of the tin… ah, apple.

Footnote: Since first publishing the above article it’s come to our attention that initially iTunes Radio will only be available in the US, but will shortly be released in other countries. Perhaps the beta period will serve to trial-run the service in the states, before spreading overseas?