Apple's 'iRadio' service 'stalled over royalties'

Apple has has struck a deal with Universal Music, the largest of the three major record labels, and is said to be close to an agreement with Warner Music.

But according a report in the Financial Times, executives at Sony are holding out for a better deal. Apple originally offered the labels a royalty of about 6.5c (4.2p) for every 100 tracks it streams, according to the report, later raising that to 12.5c, in line with the rate paid by internet radio service Pandora.

But the labels are reportedly arguing that Apple should pay a higher rate than services such as Pandora because of it's larger user base and bigger ambitions for it's radio player, dubbed 'iRadio'.

Reports of talks between Apple and major music labels over a streaming service surfaced last September, with shares in Pandora falling by as much as fell by as much as 17pc in response.

According to the FT, the California-based technology giant is offering the record labels three revenue streams: a royalty per track streamed, a share of iRadio's advertising revenue, and a guaranteed minimum payment should the the previous two prove unsatisfactory.

The Apple serivce is expected to offer users the opportunity to stream and buy songs via the iTunes store, as well as predict what music they want to listen to based on iTunes habits. Apple has more than 400 million users on iTunes, an advantage should it try to muscle in on the online streaming business currently dominated by the likes of Pandora and Spotify.

Music companies are keen to avoid a repeat of their original deals with Apple over iTunes, which are widely considered to have given Apple a better deal than the labels.

Rumours of a music streaming service from Apple have been floating around for some time, fuelled by a 'radio buy' icon found in an operating system update earlier this year. A predicted launch at its upcoming Worldwide Developers Conference in July will depend on Apple resolving its negotiations with record labels, while Google is reportedly planning to unveil its own music streaming service this Summer.

Apple shares hit their lowest levels in a year and half this month, closing down $23.44, or 5.5pc, at $402.80, the lowest level since December 2011. The dip follows a supplier hinting at a slowdown in iPhone and iPad production. The decline means Apple has lost its position as the world's most valuable publicly traded company to Exxon Mobil.