4/18/13: Apple Net radio service presumed not to compete with Pandora, but with Spotify

Paul Maloney
April 18, 2013 - 1:05pm

A recent piece in GigaOm suggests Apple will launch an Internet radio service not to compete with Pandora, but to bolster its music sales business against competition from on-demand services like Spotify.

As NPD Group's Russ Crupnick explained to the RAIN Summit West audience in Las Vegas, his company's data shows 38% of American consumers still think it's important to "own" music (as opposed to accessing it via on-demand streams). But for users of Pandora and other webcasters, that number rises to 41%. What's more, many of these respondents said they've purchased more new music because of what they hear on these services.

It's logical to assume, as GigaOm contributor Janko Roettgers, that partisans of on-demand services -- since they basically have any music at their fingertips at any time -- aren't nearly as compelled to purchase music downloads.

So, while the Spotify-type services, since they replace music ownership, compete with iTunes download sales, Pandora actually encourages music sales.

Apple's move would simply keep that stream listening "in-house" (and perhaps they can sell some ads) and make it ever-so-slightly easier and quicker to sell a download.

Not that this will be easy. An article from The Street (in MSN Money) reminds observers that even a titan like Apple "cannot overcome Pandora's enormous first-mover advantage."

Two major points here: (1) Pandora has created an extensive sales structure with the goal of capturing traditional radio ad spending. Apple is far behind in this respect; (2) Apple "simply will not be able to do personalization and discovery -- two key components that set Pandora apart from its competition -- at the level necessary to match the quality of Pandora's offering as push-a-button-and-li​sten-wherever-you-ar​e radio." writes The Street.

Regardless, as the NPD data also shows, Apple's share of the download market (while still as dominant 63% in 2012) has been falling in recent years (from 68% in 2011, 69% in 2009).

Roettgers concludes, "That’s why it’s smart for Apple to invest in iRadio. The goal is not to kill Pandora, but to actually bring that type of radio service to more users, and keep them from switching to a full-blown access model."

Read the GigaOm piece here; Reuters on more NPD data here; and The Street in MSN Money here. Finally, listen to NPD Group's Russ Crupnick's presentation from RAIN Summit West here on SoundCloud (press the orange "Play" button when the page loads).

Paul Maloney
April 18, 2013 - 1:05pm

Last.fm, Spotify, the UK's Absolute Radio, and YouTube are among the charter services joining the IAB's new Audio Council to find ways to increase value for audio ads.

The council will include consumer brands but also audio creative specialists, market researchers, and advertising experts.

"The newly formed council will explore how to further educate brands of the benefits and value of digital audio advertising along with helping audio firms develop their business models," reports TheDrum.com here.

Paul Maloney
April 18, 2013 - 1:05pm

Barry Diller has advice for local newspapers (from which local radio might draw some wisdom): get local to the granular level.

"All of you have more audience now than you ever did," Diller told attendees of the Newspaper Association of America's mediaXchange on Tuesday, where he was interviewed by The Washington Post CEO Katharine Weymouth. But the time is now to "get more granular than... (you) ever have done before." He told attendees of his surprise that more local media don't use their unique "ability to be so granular and local that you are every possible grain to anyone who lives in a defined community."

Diller is chairman and senior executive of InterActiveCorp., and his backing of the Aereo local television streaming service has him in the news lately.

He told the conference that "sleepy" companies acting like "recovering alcoholics" in the face of declining ad sales will face extinction as "irrelevant media." Those that spend on innovation will survive.

Read more from NetNewsCheck.com here.