Apple, rumored to be readying itself to announce its new streaming music service in June, has apparently failed to win favor with record labels in a bid to secure lower licensing costs. Lower licensing costs would have enabled Apple to charge as little as $7.99 a month for its streaming service – undercutting rivals Spotify AB, Rhapsody International Inc. and Rdio, Inc. by around $2.

The news comes via anonymous music executives who spoke to The New York Times.

Toni Sacconaghi, a financial analyst at Sanford C. Bernstein, is of the opinion that Apple’s late entry into the music streaming market has put it at a disadvantage with record labels.

“They’re used to being a shaper rather than a responder,” Sacconaghi told The New York Times. “This is one of the few times where Apple is playing catch-up and not necessarily coming from a position of strength.”

Unlike rival Spotify, Apple’s streaming service will not include a free tier, something high-level executives at major record labels were in favor of, said the report. Earlier this week, reports surfaced that Universal Music Group is pushing Spotify to make changes to its free tier in an effort to encourage more paid subscribers.

Apple’s new streaming music service is based on Beats Music, technology the iPhone maker acquired as part of a $3 million deal when it bought Beats Electronics last year. According to an anonymous Apple employee, Apple’s revamped Beats-based streaming service is being tested as part of a new version of iOS, code named “Copper,” due for public release later this year.

The man in charge of revamping the iPhone music app to integrate the streaming music service is none other than musician Trent Reznor, the Nine Inch Nails frontman and former chief creative officer for Beats.

Another key part of Apple’s new music strategy is a revamp of iTunes Radio, noted the report.

Apple launched iTunes Radio in September 2013 to compete with Pandora, but it has failed to find any real traction. A revamped iTunes Radio will likely have a more regional content focus, and Apple is ostensibly negotiating deals to secure highly-anticipated new albums for release on iTunes before its general release.

Last month Zane Lowe, an influential former BBC radio DJ, announced that he would join Apple’s team. It is expected he will be involved in the iTunes Radio revamp.

Image by Gabriel Scapin de Oliveira via Flickr under Creative Commons License