With iTunes Radio, Apple Takes Aim at Pandora

(from NY Times, September 10, 2013) The game of Internet radio is about to receive another player. Apple, the company behind iTunes, starts releasing its newest music feature, iTunes Radio, September 18th as part of a new system update. At first iTunes Radio will only be available in the United States, but is expected to be introduced on a global scale soon.

With Apple’s ability to immediately put the app on millions of devices, it gives the company a large potential audience from the start and makes Apple a threat to the Internet radio giant Pandora Media. However, the size of the threat is still unclear. According to Clark Fredricksen, a vice president at eMarketer, “Pandora is one of the leading recipients of mobile advertising revenue, and is one of the most popular apps, period, across devices. It’s tough to see it getting killed.” In August the company had 72.1 million active users who streamed 1.35 billion hours of music.

Record labels and music publishers are hoping that Apple’s presence will help to popularize Internet radio, especially around the world. Apple operates iTunes stores in 119 countries. “iTunes Radio can help [Internet radio] grow and can change the impressions of it in the minds of advertisers and sponsors,” said Glenn Peoples, the senior editorial analyst at Billboard.

Apple is the single largest retailer of music and with the decline of CD sales, provides labels with a key source of revenue. As such, one feature many music companies are excited about is a button to buy a song as it streams. Reportedly, Apple’s deals with labels call for it to pay $0.13 per song streamed for the first year. The ability to purchase the song as it streams provides higher revenue for the labels. In comparison, Pandora only pays labels $0.12 per song. Despite this, Apple is entering an already crowded market and has yet to make an impact on Pandora’s investors. In the year since Apple’s plans first emerged, Pandora’s stock as approximately doubled.