Why iTunes Radio Could Take Down Pandora

itunes-radio-apple-shotsPandora named former Microsoft executive Brian McAndrews as their new CEO today, just as Apple is gearing up to launch their competing iTunes Radio service on September 18th. While Pandora has claimed that they’re not worried about Apple’s new venture, we’ve listed four reasons they should be.

1. User Base

Apple’s advantage in terms of sheer reach is hard to underestimate. Pandora reports a user base of 200 million people, which dwarfs fellow streaming services such as Spotify (who reports only 24 million). Even so, Pandora’s user base is only a little over a third of  iTunes’ 575 million users. And since iTunes Radio will be built into iTunes, the service will be in the hands of practically every one of those users come September 18th. That’s the kind of instant reach that Pandora will have a hard time competing with.

2. Data

Pandora has been gathering info since 2000 on the listening habits and preferences of its users, and relies on the Music Genome Project to help custom tailor its recommendations. Apple however has the purchase history of every iTunes user at its disposal, not to mention a few years of data now from its “Genius” playlist feature that’s been quietly monitoring playback habits. If Apple can effectively mine this data, they’ll be able to predict not only what users will like, but what users will like enough to buy.

3. Price

Pandora is free to use, as long as you don’t mind the occasional ad. As of last month, they also lifted the 40-hour listening cap on their free service. If you do want to remove ads, however, a year of Pandora One will cost you $36. iTunes Radio seems to have a similar set up, with free ad-supported streaming and no listening cap. However, a year of ad-less iTunes Radio will be only $24.99 (no doubt priced directly to undercut Pandora), and will include a year of iTunes Match service which backs-up a user’s iTunes library to the cloud and allows streaming access (even for songs you didn’t purchase from iTunes). The lower price and streaming cloud service will be hard for Pandora to respond to.

4. Content

Pandora’s catalog features around a 1 million songs. iTunes Radio however, has direct deals with all three major record labels and appears to be leveraging exclusive iTunes store content for radio use as well. The preview page for iTunes Radio currently states that exclusive album releases and studio sessions will make their way onto the service before they come out in stores. That’s a big win for a service whose point is to help users discover new music.

You can be sure that Pandora won’t sit idly by as iTunes Radio begins to gain popularity, and a new challenger will hopefully drive innovation among these services. All the advantages above also won’t mean anything if the taste-matching ability of iTunes Radio isn’t up to par, although based on this early review from Fast Times, it seems Pandora has legitimate reason for concern.

About 

Born in Alaska, Cameron is now a resident of Nashville, TN. He graduated from Sewanee: The University of the South with a degree in English and Political Science. He enjoys following emerging technology and its impact on business. Follow Cameron on Google+, or email him with any questions or comments.


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