The move by Apple into the music-streaming arena can put pressure on the entire terrestrial radio business, not just on digital rival Pandora, one music-industry veteran said yesterday.
Apple CEO Tim Cook is reportedly negotiating with record labels so the company can start its own digital radio station — a move that shaved 16.7 percent off Pandora’s shares yesterday.
But Apple’s entry could also slam Bob Pittman’s Clear Channel, the music veteran source said.
“So much of the competition is in mobile now. There is an opportunity [for Apple] not to just go after Pandora and Clear Channel’s iHeart [online radio app], but all terrestrial radio.”
The recorded music labels get almost nothing from terrestrial radio airplay and would love to see digital subscription plays take hold.
Paul McLane, editor of Radio World, said, “The big guys like Clear Channel have been asking themselves, ‘How do we make ourselves smarter digital citizens’ — and many are struggling with it.”
McLane cautioned against too much optimism about the Apple move, noting that previous entries into radio by tech companies, like Google, which bought automated ad firm DMarc for $100 million back in 2006, weren’t all that successful.
Subscription revenue from music-streaming companies like Pandora and Spotify grew 13 percent in 2011 to $241 million, while the download business dominated by iTunes is worth $2.4 billion, according to RIAA data.
Pandora shares closed at $10.47.
Commenting on the Apple move into music streaming, Wedbush analyst Michael Pachter said, “They won’t take 100 percent of Pandora’s business, but they may capture 10 percent to 30 percent of the [streaming radio] market.”
Apple is hoping to work directly with labels to license music and add features such as one-click purchase of songs heard on the radio service.
While Pandora has helped introduce music discovery, Apple has historically been weak in that area.
Apple’s move, first reported by the Wall Street Journal, seems like a belated entry into a rapidly growing subscription-music business, but it seems logical, given the increasing popularity of payment for access and away from direct purchases.