Apple sending out iTunes Radio terms to indie record labels

iTunes Radio (three-up, iPhone 5)

In dramatic fashion, Apple’s iTunes Radio negotiations with the top 3 record labels came down to the wire. After a number of setbacks, the company was determined to unveil its new streaming music service at WWDC. And it reportedly spent the days leading up to its keynote closing deals.

But now that the [beta] launch has come and gone, Apple is looking to expand its streaming library. According to a new report from The Wall Street Journal, the company has been talking to various indie music labels, letting them know how the royalty pay scale work on the new service…

The Journal’s Hannah Karp and Jessica E. Lessin report:

“Ahead of its launch of an online radio service AppleAAPL -1.13% circulated terms to independent record labels last week, many of them more generous to the music companies than what rival Pandora MediaP +8.04% currently pays.

Apple intends to pay royalties to labels based on a blend of how many times listeners hear their songs and how much advertising Apple sells, according to the terms, which were reviewed by The Wall Street Journal.”

The report goes on to outline the terms that Apple is offering the record companies. For starters, it will pay them 13 cents every time a song is played and give them 15% of ad revenue during their first year. And in their second year, it will give them 14 cents per song and 19% of ad revenue.

On the surface, this sounds like a much better deal than what Pandora offers. The veteran music streamer only gives labels 12 cents per song played, and just an 8% cut of ad revenue. Unsurprisingly, it’s under fire right now for underpaying artists, and is currently quarreling with several musicians.

But Apple’s deal does come with some restrictions. For example, The Journal says it won’t pay for song plays if they’re already in a listener’s iTunes library, part of an album they own, or if they’re skipped before the 20 second mark. However, Apple can only avoid royalties on 2 songs per hour, per user.

Tim Cook and company unveiled the streaming music service during Apple’s WWDC keynote earlier this month. They’re hoping the service will lead to new music discovery for iOS users, and in turn to music sales. iTunes Radio is slated to launch in the fall, alongside the public release of iOS 7.