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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Comments

  1. Sarah Weinstein

    In my opinion, I think there will be simply a large overlap of users that take advantage of both services. For example, I use Spotify and Pandora about equally. I prefer Spotify when I’m using my computer and Pandora when I’m listening via my iPhone. We’ll see if iTunes Radio makes it into my mix!

  2. Jordan Schneider

    Great points made here, man. I’m personally a bit skeptical about iTunes Radio. They’re already lacking the “innovation factor” since they’re about 10+ years late to the internet radio party, so that’s working against them. But, with a brand as big as Apple’s, they could definitely still pull it off. They just need to avoid repeating recent history, like when they released iTunes 10 or Apple Maps, both of which were poorly designed and barely functional! If they can avoid that, I think they’ve got a shot at getting some portion of the market share.
    I’m more curious about how their business model is different. Are they paying less in copyright royalties? At the end of the day, that’s why internet radio is such a toxic industry right now. Pandora and Spotify, despite their large user bases, still aren’t profitable models.

  3. Susan Boutot

    I love my Pandora but itunes and all those extras will make it difficult to make a decision.  I agree with Sarah; it may be that I listen to what is convenient to me where ever I am listening.  Boy, brand loyalty has gone out the window these days…

  4. Sarah Weinstein

    In my opinion, I think there will be simply a large overlap of users that take advantage of both services. For example, I use Spotify and Pandora about equally. I prefer Spotify when I’m using my computer and Pandora when I’m listening via my iPhone. We’ll see if iTunes Radio makes it into my mix!

  5. Jordan Schneider

    I’m more curious about how their business model is different. Are they paying less in copyright royalties? At the end of the day, that’s why internet radio is such a toxic industry right now. Pandora and Spotify, despite their large user bases, still aren’t profitable models.

  6. Susan Boutot

    I love my Pandora but itunes and all those extras will make it difficult to make a decision.  I agree with Sarah; it may be that I listen to what is convenient to me where ever I am listening.  Boy, brand loyalty has gone out the window these days…