Royalty ruckus scuttled iPhone 5 music streaming

Sony/ATV artist Taylor Swift

Sony/ATV artist Taylor Swift (Getty Images)

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Apple’s plan to have its own music-streaming service built into the iPhone 5 was dramatically dashed when talks between the tech giant and Sony/ATV hit a last-minute snag, The Post has learned.

Sony/ATV, the world’s largest music publisher, and Apple couldn’t agree on a per-song rights fee, sources close to the situation said.

Those rights are usually tenths of a penny per stream, sources said. Sony/ATV was looking for a higher rate.

At the same time, Sony/ATV is about to set the musicstreaming sector on its ear as it will pull out of the two main copyright associations, Ascap and BMI, in January, executives close to the matter said.

Leaving the two groups will make it harder for companies like Pandora to negotiate future rights deals.

Ascap and BMI have the power to negotiate streaming rights for all members — affording the Pandoras of the world one-stop shopping.

Sony/ATV leaving the groups is the first big move it is making since a consortium it administers got approval to buy EMI Music Publishing.

With EMI under its power, Sony/ATV administers 2 million copyrights that include tunes from Taylor Swift to One Direction and embrace classic sounds such as The Beach Boys and The Beatles.

Sony/ATV’s rejection of Apple’s terms for its streaming service is a rare defeat for the Cupertino, Calif., company.

Apple needed to negotiate rights from the individual rights holders and not simply from Ascap and BMI as Pandora did because it was looking to operate a souped-up streaming service, sources said.

Apple also lacks recorded music rights from the labels.

Talks between Sony/ATV big boss Martin Bandier and Apple software and services hncho Eddy Cue had been moving ahead, sources said, and word even leaked earlier this month about Apple’s planned streaming service.

In fact, the leak on Sept. 6 knocked 22 percent off the price of the shares of sector leader Pandora over two days.

Sony/ATV is owned by Sony Corp. — an Apple rival in consumer electronics — and by the Michael Jackson estate.

Apple and the music labels have been cooking up a plan to create a radio service that adds a more human element to new music discovery.

While Pandora serves up songs based on algorithms, Apple’s talks with the labels involves an element of promotion based on what music labels are pushing in any one month, sources said.

Apple is talking about more flexible licenses than Pandora’s since it would allow the tech giant to point people directly to its iTunes store to generate sales.

Apple’s streaming licenses would also allow it to play a selected artist more times than Pandora’s rights allow it to.

The Sony/ATV snafu means music streaming is more likely to appear as an iPhone update in future months, sources said.

“They didn’t put whatever they needed to put in the app,” said one source familiar with conversations. “It seems they were rushed into it.”

Apple’s iPhone 5 has sold 5 million units in its first week.

Apple declined to comment on its proposed streaming service. Sony/ATV execs could not be reached for comment.