9/24/13: iTunes Radio and Pandora show complementary strengths and weaknesses

Brad Hill
September 24, 2013 - 12:10pm

Media reviews tend to binary considerations -- either/or judgments of new products. Accordingly, reviews of iTunes Radio are commonly framed in opposition to Pandora, as in SFGate’s review premise: “Now that iTunes Radio has shipped to millions of iPhone and iPad owners, does that mean you should delete Pandora?”

The single-service presumption is wrong for people who carry a few different listening platforms on their mobile devices, but has an underlying reality. First, it is a natural consumer behavior to settle into one solution and build a habitual connection with it. Second, any streaming service grows in personal value the more it is used, as the user invests time listening, evaluating, creating playlists, sharing socially, and generally building equity in the platform. Loyal use pays off in better experience, especially when a recommendation engine is guiding the music. All such engines become smarter over time, as you thumbs-up and thumbs-down songs and skip tracks.

Platform intelligence is the first of the three i’s which frame the user experience of iTunes Radio, Pandora, Google All Access, and other internet radio providers that algorithmically personalize audio to the listener’s preferences. The Echo Nest is a large solution provider for many platforms. Pandora, of course, has built a proprietary recommendation brain (its Music Genome Project) over many years.

The second of the three i’s is the service interface -- the look-and-feel of the desktop and mobile clients in which the user builds a listening home and identity. 

Finally there is inventory -- the underlying catalog from which programming emanates. Some listeners want Top-40; others plumb an immensely long tail of 30-million tracks.

Accepting for now the premise that iTunes Radio is facing off primarily against Pandora for the lean-back listening market, the intelligence and inventory aspects of each will tell the story. Pandora’s genomic brain has proven out to millions of users as an exceptional listening experience. In a pre-RAIN Summit conversation, Geoff Snyder of Pandora described how algorithmic calculations enhance the intensive human evaluation of song characteristics. The gigantic collection of share, thumbs up/down, and skip metrics amassed by Pandora creates an amorphous cloud of intelligence that envelopes genome considerations and further personalizes an already smart engine.

What does iTunes Radio bring to the table? A recommendation intellect enlightened by the user’s personal music collection, in some cases garnered over ten years of iTunes purchases and imports. For a new service lacking any history of thumb-and-skip actions, that insight represents a meaningful and instant snapshot of user taste.

The inventory issue plays out sharply in comparing iTunes Radio with Pandora. While the exact scope of Apple’s catalog is not disclosed, the company’s direct licensing extends its existing comprehensive label relationships. Pandora, which pays statutory royalties, owns a slow-growing catalog whose every track is hand-qualified. Pandora’s library is fractional compared to Apple's, and a devoted listener can hear some staleness over a period of time.

Our intensive listening test of custom artist-centered stations running in parallel on iTunes Radio and Pandora revealed more adventurousness in iTunes Radio, as it explored the wider boundaries of its catalog, but also more mistakes. Song skips seemed to throw the stream off-track from personal preferences, as if they were over-weighted. (The testing was located in an iTunes account with zero purchasing history and no local collection.) Pandora provided the usual strong customization, but with selections previously heard in a long-standing station.

Apple will benefit from its ecosystem advantages, as commonly predicted. Perhaps a surprise that iTunes Radio was not surfaced as a distinct icon on the mobile desktop, it nonetheless will probably attract first-time internet radio users. Placing the iTunes download store links against full-track listening could extend iTunes’ legacy business, which might be facing a downtrend as access replaces ownership.

But there is probably not enough intelligence in the Apple system to lure Pandora users who have built years of customization equity in their platform. What Pandora needs to keep the scales balanced is a much fatter catalog -- and better sooner than later.

Paul Maloney
September 24, 2013 - 12:10pm

Webcaster Songza has launched a "native advertising" solution it says is already producing benefits for advertisers in engaging potential customers.

Songza is the webcaster known for its Music Concierge, which offers curated playlists suited to listeners' activities and moods (and has been replicated by services no less than iHeartRadio and Slacker). Native advertising means incorporating brands and ad messages into the actual content of a service -- in this case, Songza's musical experience.

Co-founder and CCO Eric Davich described the benefits of the platform, named "Sponsored Moments," to the SoundCTRL blog. According to Davich, the program is about tapping "into the personal, trusted connection we have with our users in order to provide contextually relevant experiences."

Songza has worked with brands like Taco Bell and Samsung and created song collections like "Getting Hyped" and "Going Back to College" that fit those brands.

"We work closely with brands to tell their story with the personality," Davich said. Brands "need to contextualize their message in a way that relates to the consumer's context," he continued, "not just who they are and where they're from, but also what they're actually doing at that very moment."

Songza recently completed it latest round of financing of $4.7 million (investors include Lady GaGa's and Justin Bieber's managers), and took home the FlashFWD award for "Best in Discovery."

Read more in SoundCTRL here.

Brad Hill
September 24, 2013 - 12:10pm

Apple is showing off some dazzling M’s:

  • 200M iOS 7 activations (iOS 7 includes iTunes Radio by default)
  • 9M iPhones sold (combined iPhone 5s and 5c)
  • 11M unique listeners on iTunes Radio

That last item is generating some noise in the media echo chamber, and some misunderstanding. Witness this CNET headline: “At this pace, iTunes Radio beats Pandora in a month.” As baseball enters the scramble of its final pennant races, it should be a reminder that in sports and business, it’s a long season. Predicting Pandora’s defeat after less than a week of Apple competition is like predicting an undefeated season for a pitcher who wins his first game in April.

Furthermore, there is an importance difference between unique users and active users. As anyone in the content business knows, attracting unique users is hard, but converting them to active users who return to the brand is even harder. Pandora has over 200M uniques, and over 70M actives. It is fair to presume that many of Apple's 11M uniques were engaged in experimental listening. The three-month build-up to iOS 7 and iTunes Radio, following Apple’s WWDC announcement in June, naturally created some degree of must-try anticipation. No data are available as to whether Pandora experienced a listening dip over the weekend. But whether it did or not, it is reasonable to assume that Pandora and Apple are sharing uniques. Some of them will probably become unglued from existing Pandora habits. But it’s also reasonable to assume that with Apple’s colossal iOS 7 footprint (e.g. those 200M activations, with more to come), some of the 11M uniques are first-timers dipping their toes into the currents of internet radio for the first time. Those might be users that Pandora will never acquire ... or never would even absent Apple's gravitational field.

Music streaming is not a one-winner business, any more than the mobile ecosystem industry consolidates around a single dominant player. However, carrying through that comparison, major-league internet listening will probably boil down to two, three, or four preeminent platforms, surrounded by a cloud of smaller indies. If that’s how it plays out, it will in retrospect be unsurprising that Apple, with its intense user trust and equity in the music and mobile businesses, took a giant first step.

It might be worth noting that on Monday, Pandora stock (ticker: P) skidded from its Friday close of $26.99 to yesterday’s final price of $24.26, a plunge of just over 10 percent. There can be no certain connection between Apple's strong start and the precipitous one-day decline of P stock, of course. But Wall Street is no less reverberative than the media business.

Brad Hill
September 24, 2013 - 12:10pm

As jubilantly announced on its public blog (“Hello Argentina, Taiwan, Greece and Turkey -- Spotify here!”), the interactive streamer has expanded its reach. With the addition of those four, Spotify now distributes its desktop and mobile app experiences in 32 countries. The deal is standard Spotify: free, ad-supported desktop listening, a subscription tier to eliminate the ads, and a higher sub plan for mobile streaming and downloading.

Here are the international ranges of other music listening platforms:

  • iTunes Radio: U.S. only Xbox Music: 22 countries (free streaming available in 15)
  • Google All Access: 11 countries (U.S., Australia, added nine European countries in August)
  • TuneIn Radio: 80 countries and territories (see here)
  • iHeartRadio: U.S. only
  • Pandora: three countries (U.S., New Zealand, Australia)
  • Rdio: 31 countries
  • Rhapsody: 17 countries (some non-U.S. apps are branded as Rhapsody-owned Napster)
  • Slacker: U.S. and Canada
  • Songza: U.S. and Canada

As a counterpoint to the relentless regional agnosticism of internet radio (notwithstanding streaming broadcasts featured on TuneIn and iHeart), you might want to read remarks delivered by FTC Commissioner Ajit Pai (PDF) at last week's Radio Show luncheon. In his speech, Commissioner Pai held forth on the value of localism, before discussing revitalization of the AM band.