iTunes Radio and Music Streaming Industry: The Virtue of Competition

Article by Cornell Law students, Minsuk Han and Donial Dastgir

When Apple unveiled iTunes Radio in June 2013 as a part of a developer preview of iOS 7¹, it confirmed years of speculation and anticipation that Apple would enter the music streaming market. Rumors of Apple’s plans had abounded since Pandora became popular and amplified upon the introduction of iTunes in the Cloud² and Spotify’s American debut ³ in 2011. A preeminent music streamer in Europe, Spotify’s American debut marked the Swedish company’s aggressive expansion plans and drew significant attention to music streaming market.⁴

Given Apple’s dominance in the digital music market, ⁵ iTunes Radio is considered to be a significant threat to Pandora and Spotify. Some have labeled it a “Pandora killer.”⁶ When Apple finally made iTunes Radio available for the iOS devices, Macs, and PCs in September 2013, the advertising-supported music streaming service prompted Mike Herring, CFO of Pandora, to acknowledge that iTunes Radio posed a “credible threat” that Pandora took “very seriously.”⁷ Apple has built an iTunes ecosystem that numbered 575 million users in June 2013.⁸ It is estimated that 500,000 new users, actively willing to pay for music, are added each day.⁹ As a result, iTunes has the most user “accounts with credit cards anywhere on the Internet.”¹⁰ This enables Apple to analyze the myriad of data on user download and purchase history to create “curat[ed] playlists that match [people’s] taste.”¹¹

iTunes Radio has performed well so far, “notch[ing] 11 million unique listeners in just five days.”¹² And it cannot be denied that iTunes Radio benefits from its connection to iTunes. For example, one can save favored streaming songs on a wish list and buy them later with little difficulty (or buy them instantly while you are streaming it on iTunes Radio).¹³ Upcoming albums are often previewed in their entirety on iTunes Radio exclusively.

However, there is reason to believe that iTunes Radio will not be able to quickly, if ever, win the music streaming market. iTunes Radio users do not find its automated song selection to be superior to Pandora’s, at least yet.¹⁴ In addition, other players are moving fast to provide a better user experience. For example, Spotify recently allowed all its users to shuffle play any playlists on their mobile devices, a feature that had been previously limited to Spotify’s paid service, Spotify Premium.¹⁵ At the same time, they have also expanded use of its iPad app beyond Spotify Premium users.¹⁶ Such innovations would probably not have happened had the streaming services been under the constant pressure to attract new customers in this relatively new, yet highly competitive, industry.

Further, Apple is not the only company that introduced a new music streaming service recently. In May 2013, Google introduced Google Play Music All Access,¹⁷ while Beats Electronic’s Beats Music service debuted in January 2014.¹⁸ Beats Music carries the unique advantage of being marketed by AT&T, which can conveniently bill its customers’ mobile service account, giving Beats Music instant access to AT&T’s 110 million customers.¹⁹

It is clear that the battle for the streaming music market is far from over. This is undoubtedly a good thing for consumers. As more music services become available through new and innovative platforms, and Apple and other music streaming service providers keep striving to improve their services, we, the users, reap the benefit of having a wealth of increasingly good choices.

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1 Apple, Apple Announces iTunes Radio (June 10, 2013), https://www.apple.com/pr/library/2013/06/10Apple-Announces-iTunes-Radio.html.^↩

2 Apple, Apple Introduces iCloud (June 6, 2011), https://www.apple.com/pr/library/2011/06/06Apple-Introduces-iCloud.html.^↩

3 Spotify Blog, Hello America. Spotify Here (July 14, 2011), http://news.spotify.com/us/2011/07/14/hello-america-spotify-here/.^↩

4 Alex Pham, Spotify’s Digital Music Service Debuts in U.S., L.A. Times (July 14, 2011), http://articles.latimes.com/2011/jul/14/business/la-fi-ct-spotify-launch-20110715.^↩

5 As of 2012, iTunes accounted for about 75% of global digital music market with $6.9 billion revenue from music sales. See Horace Dedlu, Measuring the iTunes Video Store, Asymco (June 19, 2013), http://www.asymco.com/2013/06/19/measuring-the-itunes-video-store/.^↩

6 Laura DeLisa Coleman, Why Apple’s iTunes Radio Isn’t a Threat to Pandora or Spotify...Yet, The Daily Beast (Nov. 12, 2013), http://www.thedailybeast.com/articles/2013/11/12/why-apple-s-itunes-radio-isn-t-a-threat-to-pandora-or-spotify-yet.html.^↩

7 Joan E. Solsman, Pandora CFO: We Do Internet Radio ‘Better Than Anyone’, CNET News (Oct. 14, 2013), http://news.cnet.com/8301-1023_3-57606159-93/pandora-cfo-we-do-internet-radio-better-than-anyone-q-a/.^↩

8 See Horace Dediu, What’s an Apple User Worth? Asymco (June 14, 2013), http://www.asymco.com/2013/06/14/whats-an-apple-user-worth/. ^↩

9 See id.^↩

10 MG Siegler, Apple Now Has 200 Million iTunes Accounts, Biggest Credit Card Hub On Web, TechCrunch (Mar. 2, 2011), http://techcrunch.com/2011/03/02/apple-200-million-itunes-accounts/ (quoting Steve Jobs).^↩

11 Amadou Diallo, Quest for the Perfect Playlist: iTunes Radio, Pandora and Spotify, Forbes (Sept. 24, 2013), available at http://www.forbes.com/sites/amadoudiallo/2013/09/24/itunes-streaming-radio-versus-pandora-and-spotify/.^↩

12 E. Solsman, At This Pace, iTunes Radio Beats Pandora in a Month, CNET News (Sept. 24, 2013), http://news.cnet.com/8301-1023_3-57604226-93/at-this-pace-itunes-radio-beats-pandora-in-a-month/.^↩

13 See Marc Hogan, Apple’s iTunes Radio Isn’t the iPod of Streaming, But It’ll Do, Spin (Sept. 19, 2013), http://www.spin.com/articles/apples-itunes-radio-first-impressions-review-streaming-service/.^↩

14 Shane Cole, 92% of iTunes Radio Listeners Still Use Pandora, Says New Report, AppleInsider.com (Oct. 28, 2013), http://appleinsider.com/articles/13/10/28/92-of-itunes-radio-listeners-still-use-pandora-says-new-report.^↩

15 Josh Lowensohn, Spotify's Free Shuffle Mode Arrives on iPhone, The Verge (Jan. 8, 2014), http://www.theverge.com/2014/1/8/5288522/spotifys-free-shuffle-mode-arrives-on-iphone^↩

16 Candice Katz, Music for Everyone. Now Free on Your Mobile, Spotify (Dec. 11, 2013), http://news.spotify.com/us/2013/12/11/music-for-everyone-now-free-on-your-mobile/.^↩

17 Brian Anthony Hernandez, Google Unveils Streaming Music Subscription Service, Mashable.com (May 15, 2013), http://mashable.com/2013/05/15/google-play-music-all-access-streaming-subscription/.^↩

18 Victor Luckerson, Beats Has a Secret Weapon to Decimate Spotify, iTunes, Time Business & Money (Jan. 16 2014), http://business.time.com/2014/01/16/beats-music-streaming-service-partners-with-att/. ^↩

19 See id.^↩