The iMac is brand new and still I wiped the drive, reinstalled El Capitan and then moved over all my applications and files.
It's the "moved over all my applications" part that you want to rule out as a possible cause. I'm not saying you should wipe your data and reinstall a fresh OS X system. Use an alternate test system (with the same hardware) with the latest OS X, that does not have any third-party software. Using the iPad is not helpful, because that is completely different hardware. You're not trying to prove the problem is on the iMac; it is obviously a problem on the iMac. The goal is to isolate the problem on the iMac, and hopefully eliminate it. One step is to rule out third-party software as the cause.
NOTE: You can use Disk Utility to create (add) a small partition to the internal drive, and you can install your clean test system there, if you don't have an external drive (or sufficiently large SD card) that you can use for the test startup disk. I didn't suggest that, because there is a small risk to existing data. I prefer to use my SDXC card and start up from it for testing, because that leaves my day-to-day system on my Mac's internal drive alone.
Decided to install Fidelia player (iTunes alternative) and see what happened- issue disappears.
That's good. It probably means your iMac's hardware is ruled out as the cause. As a test, what happens if you use QuickTime Player to play a song? And it would be good to know if iTunes on a test system with no third-party software installed still has this problem.