Apple is on the verge of rolling out its
own music streaming service, a move that could shake up the fast-growing
Internet radio market.
Apple Inc. has signed deals with two major
music labels for the rights to stream their songs but is still negotiating with
a third music label, which could delay Apple's plans to announce the iRadio
service next week at the company's developers conference.
Apple
is on the verge of rolling out its own music streaming service, a move that
could shake up the fast-growing Internet radio market
When Apple finally does launch its
streaming service, it will be a relative latecomer, following rivals such as
Pandora, Radio, Google, Spotify and even Microsoft. But with Apple's position
as the world's largest music retailer, with the iTunes store available in 119
countries, analysts say it would be a mistake to underestimate the impact its
service could have.
"There are plenty of reasons for Apple
to want to play here," said James McQuivey, a Forrester Research analyst.
"I'm sure they're thinking it would be a real shame to give up the digital
music business that they helped define." Apple's new music service is expected
to be a free, ad-based streaming service that uses listeners' preferences to
tailor music selections, similar to Pandora.
"There
are plenty of reasons for Apple to want to play here"
The growing popularity of streaming music
services points to a fundamental, if gradual, shift in the way consumers listen
to songs. Such services generated 15% of the recording industry's revenue in
2012, up from 3% in 2007, according to the Recording Industry Assn. of America.
Apple continues to dominate the sales of
downloaded music through its iTunes store. But as gadgets such as smartphones
and tablets become more powerful, and wireless networks become faster,
consumers are increasingly comfortable using ad-based streaming services, and
in some cases paying a subscription.
Apple
continues to dominate the sales of downloaded music through its iTunes store
On Monday, The Times confirmed the status
of Apple's negotiations, some of which had been reported by the New York Times
and the Wall Street Journal.
Warner Music Group became the first major
label to sign a publishing and music licensing deal with Apple for an Internet
radio service, according to several people with knowledge of the situation.
Universal Music has granted a music license
to Apple, but is still negotiating terms for a deal with its publishing arm,
according to people familiar with the matter who requested anonymity because
contract talks are confidential.
The biggest holdout is Sony Music
Entertainment and its publishing arm, Sony/ATV, the music publishing company
co-owned by the estate of Michael Jackson and Sony Corp.
Apple's
iRadio may represent a way to introduce music aficionados to new songs and
artists they might like, based upon what they have already bought through the
iTunes store
Apple and music label spokespeople declined
to comment. Apple has been in discussions with the labels for quite some time,
as it seeks to expand its music offerings beyond digital song downloads and its
iCIoud service, which provides users access to their music library and other
types of content from any Internet-connected device.
In the two deals struck so far, Apple
apparently has offered to pay more than Pandora for the music streams, provide
a share of the revenue and pay an advance, according to sources. Apple's
streaming offering also addresses one of the perceived shortcomings of digital
services, which are great at selling the consumer songs that they have searched
for but less deft at providing recommendations and introducing new music.
Apple's iRadio may represent a way to
introduce music aficionados to new songs and artists they might like, based
upon what they have already bought through the iTunes store. Apple has amassed
a tremendous amount of information about people's listening preferences, so it
potentially could draw from this information to launch an Internet radio
offering that is tailored to individual tastes.
Analysts do not expect that a streaming
service will necessarily be a big money maker for Apple. Instead, the company
simply needs to create a compelling experience that will enhance the experience
of current users of its devices. "I don't think Apple Is going to do
anything groundbreaking," said Trip Chowdhry, the managing director of
equity research at Global Equities Research. "There are just certain
experiences on the platform that they need to own, like maps, which are
important to consumers. It's one more thing to keep people on the Apple
platform."
