) may be gunning for world domination of the streaming music
industry, but a new report indicates that it may only have what
it takes to lead online radio. According to
, Apple is inching closer to a deal with Warner Music Group and
Universal Music Group.
) has yet to come aboard, but it seems likely that it will if the
other major labels decide to sign with Apple.
Interestingly, Apple is reportedly working on a way to make up
for its per-stream payment plan, which is rumored to pay half of
what Pandora (NYSE:
CNET's sources claim that labels are asking for a 35 to 45
percent share of all ad revenue. If Apple agrees to those terms,
it could ultimately provide labels with larger checks than they
are currently receiving from Pandora.
That, however, assumes that Apple can sell enough ads to raise
Radio ad sales would be a new business for the Cupertino,
California-based tech giant. The company has enough resources to
hire the best sales team in the world, which should help reduce
the inevitable hurdles Apple may have to overcome. Even so,
content businesses are far from easy.
Statistically, consumers do not seem to be very fond of ads.
One 2010 study showed that as many as
of 18-to-24-year-olds dislike the ads displayed on Hulu and
Those complaints have not translated into revenue declines,
however. In fact, Hulu revenue
and in 2012
. Paid subscriptions increased from 1.5 million in 2011 to three
million in 2012.
This could be why YouTube is eyeing a
paid subscription model
Even without paid users, YouTube still provides Google with
billions of dollars
in annual revenue.
Thus, Apple may not be afraid of turning off users with a
plethora of ads. At the end of the day, it knows consumers will
listen anyway -- if the service is compelling enough.
Apple also has the benefit of pushing its new music service to
400 million iTunes account holders
. If just 15 percent of those users started playing music on
iRadio, Apple would have enough listeners to overtake Pandora,
54 million active users
That would be huge for Apple -- but it may not be enough to
dominate the streaming music business.
Thus far, every iRadio rumor (including the one from CNET) has
stated that Apple will not provide an on-demand listening
service. Instead, Apple plans to create an online radio service
with songs that play at random. There may be playlists and
customization features to improve the listening experience, but
it will not offer the on-demand content provided by Spotify or
Spotify currently has
24 million active users
worldwide, including six million paid users.
Rhapsody is far smaller with only a million subscribers, but
plans to expand
in Europe later this year.
These are small fries compared to Pandora and the potential of
Apple's radio service. Spotify is growing very quickly, however.
It is one of the few music services that offers a free,
ad-supported option for on-demand music streaming. Without a
comparable option, Apple may find it difficult to wipe Spotify
off the map.
Louis Bedigian is the Senior Tech Analyst and Features Writer
of Benzinga. You can reach him at 248-636-1322 or
firstname.lastname@example.org. Follow him
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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