iRadio Puts Apple in the Streaming Music Business

Eddy Cue the Apple senior vice president of Internet Software and Services introduces the new iTunes Radio during the keynote address of the Apple Worldwide Developers Conference Monday, June 10, 2013 in San Francisco. (AP Photo/Eric Risberg)

Apple finally jumped into the free music streaming frey today at the opening of the four day Apple Worldwide Developers Conference, putting the world’s leading music download service into the internet radio business dominated by Pandora and Spotify.

Initially to be available in just the U.S. on mobile phones, tablets and computers, Apple’s long-rumored, advertiser-supported iRadio service was made possible last week when Sony inked deals covering both its' recorded music operation Sony Music Entertainment  and its’ publishing wing Sony/ATV Music which now includes the giant EMI Music Publishing operation.

The other two music majors -  Warner Music Group and Universal Music Group – previously negotiated terms with Apple, which Billboard magazine reports will pay the labels either a 50/50 share of advertising revenues (after 10-20% expenses) or, if  higher,  cumulative revenues from pay-per-play royalties. Apple will reportedly pay slightly more than the $0.0012 cents per song/per listener that Pandora forks over   - maybe $0.00125 or $0.0013 a pop   - but Apple may not be paying for playlist songs that are skipped by the listener, as Pandora still covers.

Apple can afford to be generous, as the iRadio service will include a “buy” button to purchase/download a track from the iTunes store. Using the vast storehouse of knowledge about its 500 million (world-wide) iTunes customers, Apple also will  be able to create custom stations closely  aligned  with listeners tastes, introducing them to new releases and affinity (stylistically aligned) artists likely to promote yet more “buys.”  A  much rumored about, much upgraded Apple TV service could  benefit from the iRadio service and data accumulation, too, targeting  music videos and  concert ticket offers to the shared customer base.

And it couldn't hurt Apple to dangle another sweet fruit in front of smartphone fence sitters, lately swaying towards the Google/Android world. Between February and April, Google claimed 52 percent of subscribers in the smartphone market versus Apple's iOS at 39.2 percent, as surveyed by comScore.

Google  recently launched a paid subscription service for Android phones and tablets, Google Play Music All Access, competing with the likes of Rhapsody, Rdio and Spotify, but has not entered the free, advertiser-supported streaming radio business. 

 iTunes holds a 63 percent share of the paid digital music market, followed by Amazon with 22 percent, according to NPD Group.  Just as in the early paid download days of the late 1990s, music labels have needed convincing that free streaming of songs and albums generates, rather than diminishes sales of their products.  But with Pandora now topping the ratings of some broadcast radio stations, and audio and video streams being counted in Billboard magazine’s music chart calculations, it’s become clear that streaming media is now a healthy  alternative to broadcast FM and cable music channels.

 Free streaming previews of albums don't seem to be hurting download/CD sales, either. Last week’s number one debut of the French dance duo Daft Punk with “Random Access Memories” was teased the prior week with free listens on both iTunes and Spotify.