Apple Comes One Step Closer To iTunes Internet Radio Service With Warner Music Deal; Big Announcement Expected June 10

Apple Inc. (Nasdaq:AAPL) has come one step closer to its goal to offer Internet radio after dominating the market for digital music sales. Through its iTunes Store platform, Apple is already a major player in digital music sales; now it has come one step closer to its goal of taking market share away from Pandora Media Inc (NYSE:P) and Spotify AB in the world of Internet radio streaming.

On Sunday, the Cupertino, Calif., tech giant signed a licensing deal with Warner Music Group (WMG), owned by New York private industrial group Access Industries, for recording and publishing rights, according to a report Monday morning in the Wall Street Journal, speaking to anonymous sources close to the matter.

Warner has hundreds of artists in its portfolio, including past greats like country rebel legend Johnny Cash, guitar giant Jimi Hendrix and the the Grateful Dead, as well as newer artists like Cee Lo Green, Kid Rock and the Flaming Lips. The deal would allow Apple to stream these artists and generate ad revenue, which it would share with the labels.

The company might unveil its Internet radio service during its June 10-14 WWDC2013 developer’s conference in San Francisco, Calif. In 2011, Apple signed a similar deal with Santa Monica, Calif.'s Universal Music Group, a subsidiary of French media giant Vivendi SA (EPA:VIV), home to acts including Lady Gaga, U2 and Kanye West. Still not on board is Sony Corp’s (TYO:6758) Sony Music Entertainment, which owns important labels Columbia, Epic and RCA.

According to the Journal, Apple’s deal gives a larger portion the revenue generates through its iAd service that will deliver ads through developer apps. Apple’s Internet radio aspirations come as Oakland, Calif.'s Pandora and Spotify AB of Stockholm are starting to scale their operations with the popularity of streaming as an alternative to digital music purchases.

Artists have expressed concern over Internet streaming. Significant royalty payments only go to mega acts who can generate millions of hits, while niche artists see considerably less revenue that they generate from digital music sales through services such as iTunes, bandcamp and Google Play.

If streaming replaces digital unit sales, most acts will see revenue from the sale of their recorded music plummet. The shift to digital has already changed the landscape for artists, who have had to seek out other streams of income, such as increased tour schedules and composing music commercially, such as for computer games.