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(Both terrestrial and online radio also pay music publishers, which control songwriting rights).
That is more than Pandora's current rate of 0.12 cents, and Apple will also pay music companies a portion of the service's advertising revenue.
Under the settlement with the National Music Publishers Associationn, Kazaa agreed to pay music publishers and songwriters a "substantial sum," the association said.
This free service would be supported by advertising, and Apple would pay music companies a share of those ad revenues, two people briefed on the company's plans said on Thursday.
While terrestrial broadcasters pay music publishers negotiated rates, no matter how many people are listening, online and satellite radio operators pay publishers — as well as labels and artists — for each new listener.
For a while, it seemed as though free access to all music was an inevitable development, but pay music sites seem to have found a workable model, for the time being at least.
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Included in its liabilities is $91 million that the company owes to Bertelsmann, which lent Napster money to help it develop a for-pay music service.
The soon-to-come paid music service?
Frankly it's hard to imagine any paid music event in the United States attracting a Summer Jam-scale crowd anymore.
Apple's iTunes, once the dominant force in paid music downloads, has become more of a window-shopping venue.
It's a kind of reverse karaoke — it creates background music when people sing lyrics into a microphone, and it is one of the top 20 paid music applications in iTunes.
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