Expansion plans for iTunes Radio getting clearer

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Issue Date: 
Oct 9 2013 - 10:45am

From Issue:

Two days ago we noted that iTunes Radio would probably expand its (currently U.S.-only) listening service to Canada, based on a viral spotting of a job listing. Now, Bloomberg reports on discussions with unnamed sources which clarify Apple’s roadmap in early 2014.

According to those talks, Canada is indeed on the map, along with the U.K. Those two territories are important because Pandora, generally considered to be Apple’s target competitor, does not do business in either of those countries. Pandora has overseas music licensing rights in Australia and New Zealand, where it serves music but not yet advertisements, according to RAIN’s conversation with Steve Kritzman, Pandora’s SVP of sales.

Bloomberg reports that Apple is also pushing iTunes Radio into those two markets next year. When it comes to geographic expansion generally, Apple has an advantage over Pandora inasmuch as it negotiates for content rights directly with content owners, while Pandora relies on statutory licenses which vary from country to country.

Apple’s reach into Canada and the U.K., if it plays out as predicted, would execute a triple strategy:

  • Expand audience: success in the Internet radio business is based partly on scale;
  • Grab virgin listeners: while Apple has a steep hill to climb against Pandora in the U.S., where over 72-million people are “active listeners” to Pandora, no such relative positioning exists in Canada and the U.K. In Canada especially, Internet radio users are hungry for choice;
  • Bolster existing businesses: Apple is rolling out the same imperialistic model as it did with its iTunes download business. Furthermore, Apple isn’t primarily in the music business at all -- it is a hardware vendor in the walled-garden ecosystem trade. Its platform services, like streaming music, are intended to retain iPhone and iPad users.

In this context, Pandora clings hard to its hard-earned advantages: the quality of its music selection engine, the loyalty of its active users, and its first-mover position in auto distribution.

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