The Pros and Cons of iTunes Radio

Apple may be tardy diving into the streaming market, but it might not surprise  to hear that its latest service attracted 11 million listeners in just five days. It is Apple after all, known for its blockbuster releases.  Though yet to be launched outside the United States, the service strongly resembles its biggest competitor Pandora, with the ability to make playlists based on songs, artists or genres. While Pandora currently holds 72.7% market share of Internet radio, iTunes Radio has several significant advantages.

iTunes Radio’s towering 27 million songs, versus Pandora’s 1 million, certainly gives the latter’s investors something to worry about. “Of Apple’s 67 million active iTunes customers, 42% (28 million) are current Pandora users; this group represents just under 40% of Pandora’s 72 million active users as of the end of August” (NPD recently published statistics). iTunes Radio is available for free with the latest software update iOS7 and all new iPhone devices. By September 23, three days after its new iPhone release, Apple had sold 9 million units with iTunes Radio.

iTunes currently services 199 countries and has 545 million users around the world. Should iTunes go global, it would make it challenging for any other service to compete.  According to Bloomberg, iTunes Radio should be available for customers in “the U.K, Canada as well as unspecified Nordic countries” as early as next year. Spotify offers its service in just over 30 countries, while Pandora has only launched in the United States, Canada, Australia, and New Zealand. As iTunes Radio is linked to a user’s library, those with a long history with iTunes will transfer their personalized playlists (on the other hand, those who don’t have an iTunes library could find this feature makes iTunes Radio too passive a service).

Pandora could still have the edge for now. With its unique Music Genome Project, songs are given very specific attributes by music specialists–which empowers the service with a genuine human touch when creating a playlist.  Additionally, iTunes Radio is only available on a device supported by iOS7. That excludes Android users, who represent 79.3% of smartphones shipped out in the second quarter of 2013 – a statistic Apple cannot ignore. An iTunes Radio app, available on multiple mobile platforms, will be necessary for Apple to get ahead in a crowded streaming market. Then again, its revenue does not rely on the success of this service to stay afloat – Pandora’s does (it may be argued that iTunes Radio is just another way to keep the iTunes store popular, ten years after its launch).

An important factor to today’s music streaming platforms seems missing in the release: connectivity to social media. Almost every other streaming service available today integrates this feature. Spotify, for instance, allows the listener to easily follow friend’s playlists or famous artists’ accounts. The most a user can do with iTunes Radio is manually send or post a link of the playlist listened to; not nearly as friendly as Spotify, where one can easily share excitement with a friend about a new song.

Since Apple took the time to negotiate direct label deals, it comes as no surprise that iTunes Radio has some exclusive content that Pandora cannot access through compulsory licenses. From a labels’ point of view, it is advantageous to encourage listeners to become users of iTunes Radio, because purchasing a track is a well-integrated feature in this streaming platform. Other services direct listeners to third-party retailers, adding more complexity to the customer conversion process.

Pandora is well aware of the competitive threat posed by its new rival.  It has been listening more intently to what its users want, and released an updated app to coincide with the launch of iTunes Radio. But Apple’s customer base is very deep, and user accounts make any purchase seem seamless. Moreover, even though Pandora has been around longer in the streaming market and already has a significant number of listener and advertisers, the success of Apple may hinge on the use of exclusive deals.

Justin Timberlake is a recent example of this. Part One of his album, 20/20 Experience, was a success earlier this year, streaming on the iTunes store a week before its release; Timberlake now decided to use iTunes Radio to stream Part Two, also a week prior to its release. He also accompanies the preview with short clips of his commentary in between songs regarding various anecdotes behind the record, mentioning iTunes Radio as the only place to hear the “20/20 Radio Experience”. Having both parts of Timberlake’s album debut at number one on the Billboard charts, six months from each other, confirms the strong impact of Apple’s marketing.

By Nina Thistlethwaite

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