iTunes Radio part of today's iTunes 11.1 beta, out today

Tuesday, July 30, 2013 - 12:20pm

Apple today released a new iTunes beta of version 11.1 on its developer site, including for the first time iTunes Radio for the OS X desktop. (ITunes Radio made its first public beta appearances in initial beta versions of iOS 7 and iOS for the Apple TV.)

The tech giant announced in June (RAIN coverage here) the pending official release of iTunes Radio, a free (or ad-free, for iTunes Match customers) customizable streaming online radio service. As the name suggests, iTunes Radio will be integrated into iTunes and feature over 200 curated channels, plus algorithmically-generated channels based on listeners' favorites songs, artists, and more. All the stations can be fine-tuned by the listeners, and the company says the service will "evolve" based on listening and downloading habits.

Techcrunch reports today: "On the desktop, iTunes Radio looks to operate pretty much the same as it does on mobile, providing access to some pre-set stations and letting users create their own. The interface is remarkably minimal for now, but Apple has left lots of room for custom stations. There's also a button to let you buy songs being played back instantly in the 'Now Playing' window, as you can see in the screenshot below provided by an anonymous tipster." [That's the photo below.]

Read more in Techcrunch here, and in CNet here.

Updated Rhapsody iOS app built around curated playlists and editorial content

Monday, July 22, 2013 - 12:55pm

Rhapsody's new update to its Apple mobile app is focused on "lean back" listening and print content that "bring(s) the full editorial experience to iOS devices," the company announced. 

Rhapsody editors curate both playlists and extra content like new artist recommendations, album reviews, artist interviews, and videos.

"We guide listeners through that massive catalog by introducing them to new music and old favorites via curated editorial programming. It's like the difference between shopping at Nordstrom versus Costco," said Brendan Benzing, general manager, Americas, Rhapsody.

Rhapsody redesigned the app's look and navigation, upgraded album and artist pages, and added new full-screen play and pop-up menus to add, download, queue, or "favorite" tracks and albums.

Is iTunes Radio meant to bolster download sales, or replace them?

Monday, July 22, 2013 - 12:55pm

Nielsen reported last week U.S. music download sales for the first six months of this year are off slightly (2.3%) from what they were at the same point last year. However, streaming music volume is up 24% over the same period, however. (Nielsen's report summary is here.)

Sources like GigaOm say this data indicates a trend, and is exactly why Apple is launching iTunes Radio.

"Attitudes toward music ownership have shifted drastically over the last few years. And (the Nielsen report)... makes it very clear why Apple, which upended the music business a decade ago with its iTunes Music Store, had to start its own streaming music service," wrote GigaOm.

Interestingly, it was GigaOm itself, in an earlier analysis, that suggested Apple's move may be more than just jumping on the streaming bandwagon. We reported in April (here) on GigaOm's suggestion that Apple's iTunes Radio launch isn't necessarily designed to compete with Pandora, but to bolster its music sales business.

Author Janko Roettgers wrote in the earlier GigaOm piece, "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," like Spotify.

This seems to be what Wall St. Cheat Sheet sees as well. Apple's "market dominance bodes well for the success of iTunes Radio since Apple has created a strong link between its music streaming service and the iTunes Store," it wrote.

Read GigaOm here, and Wall St. Cheat Sheet here.

Analyst demonstrates how skipping songs quickly inflates Pandora's royalty past Apple's

Friday, July 12, 2013 - 7:00am

Since the contractual terms of use for sound recordings by Apple for its forthcoming iTunes Radio became public (our coverage is here, and you can read the actual contract here), there's been a rush to determine how Apple royalties compare to those of other webcasters, like Pandora. Will song plays on iTunes Radio be more lucrative for copyright owners (and performers) than on a competitor paying the statutory rate? How do Apple's obligations truly compare to Pandora's under its "pureplay" rate?

The University of Virginia's David Touve (we've covered his analysis in RAIN before here) points out in the Rockonomic blog that these discussions fail to take into account two very important factors, both of which can significantly alter a webcaster's effective royalty rate.

Touve points out that (1) the proportion of a service's listening that comes from paying customers compared to free, ad-supported listening; and (2) how many songs listeners typically skip per hour will both impact the royalties services end up paying.

Touve's math shows that while Pandora's effective royalty is lower than Apple's for a listener who doesn't skip songs, it only takes two song skips per hour to bring them nearly equal. At just three skips per hour, Pandora is paying a higher effective rate than Apple.

Here's how. First, the "pureplay" royalty rate -- $0.0012 this year -- only covers free, ad-supported listening. Pandora pays a royalty nearly twice that -- $0.0022 in 2013 -- for songs streamed to Pandora One subscribers.

However, Apple's contract grants it either a discount, or a waiver on royalties altogether for iTunes Match subscribers! [Touve concedes he may "have misread the contract," but believes, "Apple will not owe royalties for iRadio streams to iTunes Match subscribers — even if you don’t own the track being played." It seems more likely that Apple would get an unlimited waiver only on streaming songs the iTunes Match subscribers owns in their cloud. -- Ed.] Whichever the case, Apple's obligations certainly don't go up, as Pandora's do, with subscription listening.

Taking these terms of Apple's agreement into account, Touve determines Apple will pay the contractual minimum of $0.00142 for each streamed song, or $1.42 per one thousand streams (what he calls RPM).

By proportioning paid- and free-listening, Touve calculates for Pandora an effective overall royalty rate of $0.00124 (slightly higher than the "pureplay" rate because of Pandora One listening), or $1.24 RPM. That's significantly lower than Apple's $1.42 RPM. But that's before song-skipping!

For most webcasters, the more a listener skips songs (that is, doesn't hear them, though the webcaster pays royalties for them), the higher the effective royalty rate for the songs that are played.

[Listener A hears six songs and skips two, while Listener B hears six songs and skips none. Both heard six songs, but the webcaster would have to pay for eight songs (6 + 2) for the first listener, but just six songs for the second. Thus, the effective royalty to deliver those six songs to A was higher.]

Apple, however, also gets a break on skipped songs. According to their contract, Apple won't owe for up to six songs per hour that are skipped within the first twenty seconds. (Apple also gets passes for "Listener Matched Content," "Complete-My-Album" plays, and promotional plays -- again, see the links above for our coverage of the specific terms and the contract itself).

So again, the calculations indicate that Pandora's effective royalty is lower than Apple's for a listener who doesn't skip songs. But when the song-skipping begins, Pandora's effective rate begins to climb, while Apple's holds steady. Just two song skips per hour later, they're roughly equal. At just three skips per hour, Pandora's effective rate is higher than Apple's (which, you'll remember, doesn't pay for the first six skips).

We recommend you take a look at the details in the blog and see Touve's math. It's at here.

Video demonstrates the power of Apple iTunes Radio integration with Siri

Wednesday, July 10, 2013 - 12:30pm

Hypebot has posted a short video from BTIGResearch analyst Richard Greenfield, in which he controls the upcoming Internet radio service using Siri-enabled voice commands.

The video is a powerful demonstration of the potential of the integration of Siri and iTunes Radio. As Hypebot points out, it's a validation of ideas suggested by journalist Kyle Bylin in 2011 (here), when Siri was first launched. That is, the potential for the voice-command function to truly transform how we interact with music.

In the video, Greenfield commands iTunes Radio to "play Led Zeppelin Radio." Siri understands the command, and iTunes Radio instantly creates the station and starts playing.

"Imagine if you were driving just how easy this would be," Greenfield said. When he commands "Play Adele Radio," it seems Siri didn't understand command at first, but a moment later the device "figured it out," and the station began to play.

The video and Hypebot's coverage is here.

Huge companies like Apple and Google will bring big audiences, but little innovation, to streaming radio

Tuesday, July 16, 2013 - 7:00am

This week in RAIN we're featuring contributions from various industry executives, journalists, and experts on the state and future of Internet radio.

From "unique innovator" to "a face in the crowd." That is the typical startup trajectory of a product that establishes a new consumer category.

The loss of first-mover advantage can happen fast, as with Apple’s iPhone, which first came to market in 2007 and in five years was locked in a global marketshare struggle with Android phones (and Microsoft and RIM products to a lesser extent).

Category competition tends to blunt innovation as it locks in standardization. For many smartphone buyers, there is little to differentiate an iPhone from an Android phone -– from the basic functions to the industrial design to the on-screen interface. What was once unique becomes commonplace.

Streaming music services have become similarly commoditized, thanks to suddenly increased consumer uptake and demand.

The commoditization curve has been relatively slow for Internet radio; during its early years the streaming/subscription platforms were dimmed by the shadow of iTunes and the quick mainstreaming of the music-download market. The Rhapsody subscription service launched at the end of 2001, and while there have been ownership changes and product enhancements, the core listening and discovery system has remained steady. From the first, Rhapsody and similar startups offered music access as an alternative to locally stored music ownership.

Several digital-life changes accelerated the popularity of the access model, especially a core triumvirate of factors: social, mobile, and a lengthening tail of indie music. Pandora, Spotify, Rdio, Rhapsody, and many others now scrabble for a larger share of the stand-alone streaming business.

While that competition rages, 2013 is shaping up as the year that on-demand streaming music becomes fully commoditized, and the signifier is when the major "ecosystem" companies plug in a standardized “radio” feature into their web and mobile apps. Google and Microsoft have launched their entries; Apple has staked out its ground with iTunes Radio expected to debut in the fall.

As these announcements and first product iterations roll out, it is easy to see how little invention has been invested in their development.

Instead, it is as if a punch list of required features has been ticked off and arranged with perfunctory design effort. That punch list includes a big catalogue (20-million tracks is standard), on-demand listening either free or with a paid subscription, user curating and collecting, pre-programmed “stations” (playlists), mobile access for listening anywhere, and (for subscribers) downloading music through the mobile app for offline listening. Independent streaming platforms invented the template; big media companies are copying it for their immense captive audiences.

(Variations distinguish the ecosystem streamers from each other a bit. For example, Google All Access allows users to mix their previously owned music files with their subscription downloads. Microsoft’s system, Xbox Music, spreads across a unique network of connected devices consisting of phones, tablets, computers, and the Xbox gaming console.)

Fine points notwithstanding, the streaming services offered by Google, Microsoft, and Apple are rolling out with a different business model from Pandora and the other stand-alone brands.

The independents exist to attract users to a discrete experience; the ecosystem streamers exist to prevent users from leaving an encompassing experience.

Google, Microsoft, and Apple are mostly non-music businesses -– device manufacturing, operating systems, and advertising. For them, music exists alongside mapping, productivity, general content, recreation, and mobile computing as an attraction to their high-margin enterprises. It’s understandable that their music streaming services would perfunctorily hit standard features.

A recent NPD survey found that respondents in the 13-35 age group listened to streaming music nearly as much (23%) as to terrestrial radio (24%) in Q4 2012. Among streamers identified, Pandora took the clear lead with a 39% share. The question for 2013 is how the Herculean tech companies, with their ability to place a new service on the home screens of millions of mobile devices, will displace Pandora, iHeart Radio, Spotify, and other leaders. Whether the indies survive the elephantine forces stepping into the space remains to be seen. The indies’ advantage is their history of innovation and interface design. They are less commoditized due to unique usability features and highly evolved interfaces.

No matter how it shakes out, consumers are the big winners. The celestial jukebox, a progressive idealist’s dream in the late 1990s, is part of today’s fixed reality.

Brad Hill is a former Vice President at AOL, and the former Director and General Manager of Weblogs, Inc.

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