The company will pay royalties based on a blend of how many times listeners hear their songs and how much advertising Apple sells.
During iTunes Radio’s first year, Apple will pay a label 0.13 cents each time a song is played, as well as 15% of net advertising revenue, proportionate to a given label’s share of the music played on iTunes. In the second year, that bumps up to 0.14 cents per listen, plus 19% of ad revenue.
Pandora pays labels 0.12 cents per listen on its service. Additionally, Apple is offering music publisher more than twice as much in royalties than Pandora does.
There are some other technicalities. Apple doesn't need to pay royalties for songs already in a user's iTunes library, or for songs used in special promotions. Also, Apple doesn't need to pay for songs listeners skip before 20 seconds have elapsed. However, only two songs per hour can be royalty exempt.
More details at the link below...