Apple Inc. (AAPL:US) signed an agreement with Sony Music Entertainment, the final record-company holdout needed for the iPhone maker’s planned online radio service, said people with knowledge of the situation.
Sony signed its agreement late yesterday, and Apple plans to announce the service, unofficially dubbed iRadio, at a conference on June 10, said the people, who requested anonymity because the talks are private. Vivendi SA (VIV)’s Universal Music and Len Blavatnik’s Warner Music Group have already signed agreements with Apple, people with knowledge of the situation said this month.
With the record companies on board, Apple plans to announce an advertising-supported service that will compete with Pandora Media Inc. (P:US) for listeners. IRadio will allow users to build custom stations based on an artist or genre that draws on music from the company’s iTunes library.
Apple, based in Cupertino, California, rose 0.8 percent to $441.81 at the close in New York and is down 17 percent this year. Oakland, California-based Pandora -- which today reported 70.8 million active listeners at the end of May, a 33 percent jump from the same period a year earlier -- rose 5.7 percent to $15.12 and has gained 65 percent this year.
Apple’s agreement with Sony Music was reported earlier today by AllThingsD. Sony/ATV Music Publishing, a joint venture of Sony Corp. (6758) and the estate of Michael Jackson, signed its agreement with Apple today, Chief Executive Officer Marty Bandier said in an interview.
Sony/ATV’s deal with Apple covers a two-year introductory period and provides the New York-based company with 10 percent of all advertising revenue generated from its music catalog, the biggest in the world, Bandier said. That’s more than double the current standard 4 percent rate in digital music publishing agreements, he said.
“This is a wonderful recognition of songwriters and their contributions to hit records,” Bandier said. “For so long they have received the short end of the stick.”
The radio service will be free to customers and supported by ads, people with knowledge of the offering said earlier this month. By integrating the service with iTunes, users will be able to buy and download songs that are played, they said.
Eddy Cue, Apple’s senior vice president in charge of the effort, has retooled the company’s iAd mobile-advertising unit to focus on selling audio ads and attracting large brands to the service, people familiar with the plans have said. The advertising revenue will be shared with the music companies.
Apple has pitched the service to music companies as a tool for boosting downloads of songs through iTunes. As more people listen to music for free through services such as Pandora and Google Inc.’s YouTube, Apple sees the service as a way to turn people on to new music. Services such as Spotify Ltd. and Rdio Inc., which charge a monthly fee for unlimited access to their song libraries, also have gained traction.
Apple remains the world’s biggest music retailer, representing 63 percent of the download market, according to estimates from NPD Group Inc.
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