With the music industry being required to license music to people who wish to rebroadcast their music at a reasonable price, they are trying to overturn these licensing rules so as to be able to revise the rates for music rights.
In explaining the impact of such a move on Apple among others, if successful, J.P Morgan analyst Rod Hall said, “Upward pressure on streaming costs could be a negative for Apple’s newly acquired Beats Music unit. Typically, attempting to pass this sort of cost increase through to customers after the low price Genie is out of the bottle is tough in a competitive environment.”
The organizations driving this change are American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI), thanks to these policies being put into place to prevent monopolistic practices during World War II.
At the moment, the royalty rates stand at 1.7 percent of revenues for terrestrial radio stations while online stations like Pandora pays 1.85 percent. Oddly enough, Pandora paid 53 percent of its revenues in royalties while terrestrial radio stations avoided them completely.
Apple not only started iTunes Radio last year but also acquired Beats, a premium headphone maker, in an effort to counter shrinking digital music sales. That said, Apple’s streaming service continues to remain behind both Spotify and Pandora – the current market leaders.