Post-iPhone 5 Release, Apple's New Frontier Music Streaming Service? Company to Rival Pandora
Citing people familiar with the matter, The Wall Street Journal reports that Apple is ready to get into the music streaming game. The company reportedly wants to license music for a custom-radio service that would work on its hardware -- such as the iPhone, iPads and Mac computers -- in a bid to expand its dominance in online music. Apple's iTunes is the largest music retailer.
In a move that could shake up the growing field of Internet radio, Apple plans to develop a service that would compete with Pandora Media and similar services by sending streams of music customized to users' tastes, report Ben Sisario and Nick Wingfield on Friday in The New York Times.
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Apple, which has already dominated the field of digital music with its iTunes store, is in the early stages of negotiating with the major record labels for the service, and the full scope of its plans were not clear, according to these people, who asked not to be identified because the negotiations were private.
Apple's service would likely be a preinstalled "app" on Apple's devices like iPhones and iPads, and might be able to connect to users' iTunes account to judge their tastes, reported The New York Times.
Most services that offer customized streams of music operate under limited licenses that restrict what they can do with the music, for example, limiting the number of times songs by particular artists can be played in an hour. But Apple is seeking direct licenses with record labels that would give the company more flexibility in using music, according to the people briefed on its plans.
Like Pandora, Apple's radio service would have advertising, carried through Apple's own platform. Whether Apple would then share part of the ad revenue with labels or pay them some other licensing fee is unclear. It's still also unclear whether Apple's service would be free or be a subscription service.
The move by Apple has confounded some analysts, who noted that the Internet radio business seemed too small for Apple to bother with - Internet radio accounted for less than $1 billion a year in revenue, by some estimates. Still, the clout Apple's built up through iTunes could come to seem antiquated. As Megan Guess wrote on Ars Technica, "Apple's bid for a radio-streaming service might be a defensive measure against the growing popularity of Pandora and Spotify." But it might not, she said, "be a guaranteed money maker for the company" because Pandora has yet to report a profit.
Last week, Pandora reported better-than expected quarterly results on higher advertising revenue as more people listened to music on their mobile devices, and the company raised its full-year revenue outlook.
As of news breaking on Apple's intentions, Pandora shares were down $1.77 in premarket trading from their closing price on Thursday of $10.80.
Apple initiated talks for a license with record companies only recently, The Wall Street Journal, and it could be months before a service is launched.
Apple is widely expected to debut its iPhone 5 at a press event Sept. 12 in San Francisco, could this new streaming service be part of the package? We sure hope so.