Apple is set to launch a new music streaming service called iRadio to take on established web radio sites such as Pandora and Spotify.

"iRadio is coming. There's no doubt about it anymore," a source told The Verge, after significant progress in talks over royalty fees between the US tech giant and record labels Warner and Universal.

Apple was reportedly driving for a deal to pay fees of approximately 4 pence per 100 songs streamed.

Record companies were reportedly demanding that Apple meet the Copyright Royalty Board recommended royalty rates of 14 pence per 100 songs for a non-broadcast operator.

The Apple offer is significantly less than the 8 pence paid by Pandora or the 23 pence by Spotify.

Apple is expected to capitalise on its dominance of the online music retail market to secure a wide customer base for the site, which could be integrated into a new or existing iOS app.

Apple may integrate the new service with the anticipated release of the new iPhone 5S or iPhone 6 in June.

The battle for online radio audiences is set to become even more intense with Google also reportedly due to launch its own music streaming service this year.

Experts believe that if Apple does manage to negotiate a lower royalty rate, Pandora and Spotify would in turn want to bring record company executives back to the negotiating table to secure a better deal.

Currently, online music streaming services struggle to make a profit, due to royalty payments and low advertising revenues.

Observers believe that record companies are currently attempting to maintain a precarious balance, and though seeking to maximise profits are keen not to allow important revenue streams like Spotify and Pandora to fold.

This could hand dominance of the online radio market to Apple, allowing it to control prices, much as it did in negotiations with record companies over online music retail in the early 2000s.