Industry expert suggests iRadio streaming service will come to protect iTunes download business

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Issue Date: 
Apr 18 2013 - 1:05pm

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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).

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