Apple is finalizing deals with two major record labels to launch its own streaming music service with lower royalty rates than competitors already in the space, according to a recent CNET report.

The service is expected to be a smart radio offering (as opposed to providing songs on-demand) that will be freely available across the globe and will complement Apple’s iTunes music store. If true, an Apple-branded smart radio service could also overcome one of the largest obstacles that other streaming music providers (Slacker, Pandora, and to an extent, Spotify) have: keeping content costs down.

The report indicates that Apple will be paying a lower royalty rate than other digital music services. This is a big deal because companies like Pandora have cited unreasonably high royalty rates as the reason they’re unable to generate a significant profit, despite consistent audience and revenue increases. On top of that, music industry organizations like SoundExchange (the group set up by the government that manages digital royalties for the industry) are asking Congress to revise current laws so that terrestrial (aka traditional AM/FM) and satellite radio services start paying as much as digital services do.

So how is Apple able to negotiate lower rates with the labels? According to CNET’s sources, Apple is offering those labels a cut from multiple streams of revenue, which haven’t yet been identified. I previously theorized that Apple could do this by giving people a specific number of custom stations and charging them to create more stations. Apple could also put a limit on the number of times you can listen to a song in a day and make that data obvious to the listener so they’re prompted to buy those songs. Of course, Apple can always split revenue on audio advertising that plays between songs.

But this creates a huge problem when it comes to the future of streaming music services as separate businesses. If Apple is successful, it paints the picture that you must be a huge technology corporation with an influential digital store to get royalty rates low enough to make money. That’s dangerous because the majority of streaming music services can’t offer the incentives Apple can.

Illustration by Tom Cheredar

With the newly signed exclusive streaming deal with Disney, people are once again singing the praises of Netflix. But it might be too early to determine whether or not the video service will come out ahead as a result of the deal.

The reaction by shareholders has been mostly positive, with Netflix’s stock seeing a healthy increase of 15 percent yesterday. The stock price is only slightly down today, and Sterne Agee analysts Arvind Bhatia and Brett Strauser believe the market is showing too much enthusiasm for the move.

“From a content perspective, this appears to be a major coup for Netflix. However, without knowledge of the financial terms, we think it would be premature to assume this is a net positive for Netflix,” the analysts wrote in a note yesterday.

As VentureBeat previously reported, Netflix signed two different agreements with Disney. The first of these deals brings lots of recognizable Disney flicks (Dumbo, Alice In Wonderland, and more) to the streaming service effective immediately. We don’t know how much Netflix paid for access to these classics, but my guess is that the price was not cheap.

It’s possible that Netflix will slowly roll out access to classic Disney films over time, with only a large handful of films available on the streaming service at any one time rather than providing access to the entire streaming library. This would be one way to keep its content costs down while still providing value to its streaming subscribers. Of course, we won’t know exactly how Netflix will play it until we’re well into 2013.

We should know more about how much Netflix spent on the old Disney movies in its next quarterly earnings report, but Sterne Agee points out that the company is projected to spend $5 billion in the next five years on content costs ($4.5 billion of that occurring in the next three years.) If the new Disney content fails to have a positive impact on its domestic streaming subscriber growth, traders will likely punishe its stock.

The second deal is an exclusive streaming agreement that gives Netflix the right to play all animated and live-action films with a theatrical release of 2016 and on. That’s a pretty big win for Netflix in the short-term; it has something its competitors won’t have, and it probably doesn’t have to start paying content licensing fees immediately.

At the same time, if those licensing fees are extremely high, it could cause concern among shareholders. Netflix is currently spending its money to aggressively expand into international markets and create its own exclusive content. And until we find out if either of those two strategies ultimately prove successful, it’s hard to determine if the exclusive deal with Disney was an extremely good move for the company.

Bruce Willis, perhaps best known for his portrayal of bad ass heroes in action movies, isn’t happy that his vast digital music collection on iTunes can’t legally be handed down to his daughters upon his death. The Hollywood actor is even rumored to take legal action against Apple, according to reports from The Sun and the Daily Mail.

While information from the aforementioned celebrity gossip-heavy tabloids’ is usually not the most credible, the situation does raise a good point about digital music that most people don’t realize: who owns your music when you die? [Update: The Guardian also disputes any claim that Willis is actually suing Apple, as does Willis' wife.]

When you make a purchase for a song on iTunes, you aren’t actually buying the music, but rather you’re buying the right to listen to that music, which Apple calls a nontransferable license. Apple may give you a digital copy of those songs, but the legalese states that you still don’t actually own it. — meaning that when Bruce Willis dies, so do those music licenses.

The majority of people probably ignore the iTunes Terms of Service agreement, since the company does provide you with DRM-free files to your purchases. If Bruce Willis wanted to simply give his daughters the vast collection of his iTunes library, he could always just download it to a hard drive, and hand it over to his kids when he bites the big one. It wouldn’t be legal, but since you don’t have to provide proof that identifies you as the one who bought the “nontransferable license,” it would certainly work.

This is an issue that several major music labels struggled with for years, fearing that digital music would eventually be freely passed around so often among friends and family that it would hurt music sales. Obviously, this hasn’t happened. Additionally, Apple made a deal with music labels for its iTunes Match cloud service, which charges users $25 per year to gain access to their full music library (regardless of it the songs were purchased on iTunes). Music Labels get a commission of that fee based on how many of their licensed songs appear in a person’s library.

That said, Willis is a pretty intimidating character. If he did take Apple to court, it would be about shining light on how ridiculous music licensing has become for the average consumer. It probably wouldn’t have anything to do with money — as the star probably has enough of it to buy each of his daughters their own matching music library.

Die Hard image via 20th Century Fox

Premium TV channel HBO said today it will not be forming a partnership with video rental service Netflix.

Netflix CEO Reed Hastings insinuated that his company might form an agreement with HBO — either through a future content licensing agreement or content distribution deals — in a Q2 2012 letter to shareholders yesterday. In the letter, Hastings wrote: “While we compete for content and viewing time with HBO, it is also possible we will find opportunities to work together — just as we do with other networks.”

Many consider HBO’s content to be a very valuable commodity. HBO subscribers justify spending an extra $30 per month on their already expensive cable bills to watch shows like Boardwalk Empire, Game of Thrones, and True Blood. All of HBO’s original programming is only accessible through traditional TV subscriptions or through the channel’s streaming service HBO Go — meaning Netflix subscribers can’t watch it.

“We are not in discussions and have no plans to work with Netflix,” a HBO spokesperson told Reuters.

I’m not sure why Hastings’ comments got so much attention. Netflix previously branded itself as being more competitive with HBO than with other streaming video competitors, like Hulu and Amazon Prime. Also, HBO has historically been known to play hardball with Netflix. HBO has not only refused to license HBO original TV shows, it also forced Netflix to purchase DVDs at full retail price for use in its DVD-by-mail rental service.

However, one area where Netflix and HBO may end up working together in the future could be in co-financing future original shows. But for now, HBO seems intent on not forming any kind of deal.

Game of Thrones image via HBO

LoveFilm, the Amazon-owned rental service, has signed a news deal with Twentieth Century Fox to bring a ton of new video content to its library of streaming video content in the U.K., the company announced today.

The deal is just the latest by LoveFilm to keep itself competitive with rival Netflix, which launched its streaming video service earlier this year. LoveFilm has also signed similar deals with Warner Bros., Sony Pictures, NBC Universal, Entertainment One, Disney, ABC, BBC, and ITV.

U.K. LoveFilm customers will now have access to Fox’s vast library of TV content, including early seasons of Sons of Anarchy and all seasons of 24, Prison Break, Buffy the Vampire Slayer, Angel, Firefly, and more.

These kinds of content deals are seen as crucial to remain competitive in the U.K. market, but even as LoveFilm keeps its streaming library up to par with a growing number of competitors, the move doesn’t guarantee the service’s dominance.

Image via Twentieth Century Fox

Netflix has reached an agreement with Twentieth Century Fox that will bring a ton of popular TV shows and movies to subscribers in Latin America, the company announced today.

The move is part of Netflix’s effort to drive its streaming video service into new international markets by leveraging its revenue from its domestic subscriptions. Netflix’s Latin America service, which launched back in September 2011, has seen slower than expected growth, according to the company’s Q1 2012 earnings report. That slow growth has caused it to rethink its expansion efforts to focus on markets with a solid broadband Internet infrastructure already in place.

Netflix is hoping this new (likely expensive) deal with Fox’s TV distribution unit will boost those subscription numbers heading into the second quarter.

The deal will bring Latin American subscribers all past seasons of 24, Prison Break, The X-Files, and Arrested Development as well as both current and past seasons of How I Met Your Mother, Glee, and Bones. The deal also includes streaming agreements for plenty of popular movies, such as Gentlemen Prefer Blondes, Wall Street, Office Space, and others.

The Fox content will begin rolling out July 1, with additional TV series and movies being added over the next few years.

Image via Fox

Popular video sharing site Vimeo launched a new service today called Music Store that makes it simple to find and license music for online videos.

One of the biggest problems with creating videos for the web is obtaining a licensee to use copyrighted content. Many fan-made music videos on YouTube and Vimeo, for example, infringe on the copyright of the musicians and publishers by using music without permission.

Vimeo’s music store takes a major step toward solving this problem by letting users obtain a Creative Commons license or buy licenses for non-commercial and commercial use. At start, Vimeo is offering more than 45,000 tracks from many genres. Users can search the library of available tracks by genre or browse more than 100 categories like mood or tempo.

Unfortunately, the first tracks available for licensing aren’t from the most well-known artists. The largest amount of music comes Audiosocket, which controls a catalog of 33,000 songs from upcoming artists, and from FMA, which offers more than 11,000 tracks with a free Creative Commons license.

The pricing is as follows:

• Creative Commons licenses (free)
• Personal, non-commercial, web-use licenses for the casual user ($1.99 per track)
• Commercial, web-use licenses for professional users ($98 per track)

While the prospect of licensing lesser-known music for your videos isn’t the most exciting, this is a start toward finding a middle ground between musicians trying to protect their intellectual property and video creators. Now we just need to hope Vimeo can also come up with arrangements to license big-name artists too, so you can use your favorite Lady Gaga track on that crazy art video you’ve been working on.

Check out Vimeo’s quirky promo video of the new music store below:

Netflix began its launch into 43 Latin American and Caribbean countries yesterday, so it’s certainly not wasting any time in getting high-quality streaming content there. Films covered in the agreement include newer titles like There Will Be Blood, Kill Bill and Gone Baby Gone, as well as older hits like Good Will Hunting, Pulp Fiction and The English Patient.

“The robust Netflix platform will provide a proven avenue to reach Latin American audiences and take advantage of strong subscriber growth prospects,” Miramax CEO Mike Lang said in a statement. “We look forward to growing the international audience for the Miramax library through many more partnerships like this around the world.”

While the Miramax deal is relatively small, it shows Netflix is serious about providing content in other countries. Netflix and other media companies like Hulu that are looking to stream content outside the U.S. have quite a challenge ahead of them. Each country and region has its own rules for licensing, and it’s not cheap to make it happen.

Miramax appears to be on a roll with offering digital versions of its content every way that it can. On top of making its movies available through Netflix and Hulu, the company just launched an app that enables users to rent movies on Facebook.

Netflix has been hit by two major blows as of late. First, customers were understandably angry that the company raised the price of one of its most popular plans by a whopping 60 percent. Second, it lost a major rights agreement with Starz, which will leave Netflix streaming customers with fewer movie and TV choices in Feb. 2012.

Both Netflix incidents show the company’s growing pains as it tries to continue disrupting how people consume their movie and TV content. However, if the Miramax deal is any indication, Netflix will continue its push to make as much content available for streaming as possible in order to keep customers interested.

Access to the streaming video library is just one perk for Amazon Prime members. Membership, which costs $79 per year, also gives customers free or discounted shipping rates on all items purchased through the company’s website.

The NBCUniversal content licensing deal is the second Amazon has made this month. Last week, the company reached an agreement with CBS to add over 2,000 television shows to its library of content, which has close to doubled from 5,000 to over 9,000 programs since its debut in February. Financial terms of the deals were not disclosed.

Prime members can now watch Universal films like Eternal Sunshine of the Spotless Mind, Elizabeth, Babe, Flipper, Fear and Loathing in Las Vegas and several others.

Amazon is on its way to becoming the (albeit distant) third most popular streaming video service behind major competitors Netflix and Hulu — especially if it continues forging content licensing deals with media companies like Fox, ABC and Viacom.

Right now, Netflix is able to maintain its dominance because of the vast number of licensing agreements it has with media companies. The much younger Hulu is slowly catching up, having recently reached deals to add films from Miramax and The Criterion Collection to its streaming library.

However, if Amazon attains a comparable library of content, its streaming service could become the most attractive of the bunch. Unlike competitors, Amazon Prime membership has a low annual cost, offers additional incentives beyond the streaming service (shipping perks) and has no pre-roll advertising.

But, Amazon Prime doesn’t need to become the most popular in order to succeed.

The company’s strategy toward its streaming video business is similar to that of Walmart, which recently started selling streaming video rentals on its website. As a retailer, it can use the streaming service as a promotional spring-board to sell merchandise and digital media downloads.

Pictured is actor Johnny Depp in the 1998 film Fear and Loathing In Las Vegas.

Boulder, Colo.-based Gnip was created to collect and then sell data to social media monitoring companies.

Under the terms of its deal with Twitter, Gnip will now offer those same companies three different types of Twitter data feeds: Halfhose, which is 50 percent of Tweets at a cost of $30,000 per month; Decahose, 10 percent of Tweets for $5,000 per month; and the Mentionhose, which is all mentions of a user including replies and retweets, or repostings of a user’s message, for $20,000 per month.

No company buying any of the feeds will be allowed to display the data publicly. But internal uses are endless, as the business world attempts to make sense of how much value social networks actually bring to a brand and how good they are at spreading the word about particular products or businesses.

Prior to its deal with Gnip, Twitter had only offered an option called Firehose, which was essentially a no-holds-barred full blast of all user messages, which it quickly licensed to search behemoths Google, Yahoo and Microsoft.

Twitter cofounder Evan Williams said in a panel at yesterday’s Web 2.0 Summit in San Francisco that the Firehose option quickly became more than the company could handle, prompting it to narrow in on one, smaller, more focused vendor to manage its data in a more orderly and specific way.

During that session, Williams was quick to point out this partnership was by “no means a monetization effort on par with the company’s Promoted products,” or an internal push to make the data available to the public at large.

Despite those assurance, said public responded by expressing concern that Twitter was making money off of their posts — hardly a surprise, given Twitter’s loudly discussed search for a business model and its publicized terms of service, but a dent to the image of a company that has billed itself as a “force for good.”

The search for how exactly Twitter makes companies, and their individual brands, money by leveraging its more than 50 million users worldwide, is one that has had most of the business world befuddled since the service launched.

Twitter itself also recently conducted its own internal analytics tests, which will help the microblogging service itself better help its corporate users understand how Twitter is working for them. The tests included breaking down which messages have gotten the best responses, which ones may have prompted users to stop following an account, and how well its Promoted Tweets — paid sponsor messages — have prompted response.

Gnip raised this $2 million primarily from previous investors Foundry Group and First Round Capital, bringing it to and estimated total of $6.6 million raised so far.