Just how good was iTunes Radio's start? Pretty good. Apple announced Monday that iTunes Radio picked up 11 million listeners in its first five days of availability.
The news immediately made clear that iTunes Radio should be considered a major player in Internet radio. Apple's announcement should be given a lot of weight by the music industry. iTunes Radio's integration with the iTunes Music Store could improve download sales. If successful, the service has the potential to not only impact Pandora's growth but weaken its dominance in Internet radio.
Are 11 million listeners really a good start for a household name brand whose product releases dominate more than one news cycle? Let's begin by looking at Apple's footprint: Over 575 million people globally have accounts at iTunes and the App Store, according to Apple.
But iTunes Radio is only available in the United States. Unfortunately, Apple did not disclose how many devices in the United States are running iOS 7.
And not everyone with an Apple product can use iTunes Radio. As of Monday's press release, over 200 million Apple devices were running iOS 7, the version that includes iTunes Radio. Even more people can access iTunes Radio with an update to the iTunes desktop application. But many older models of Apple devices don't support iOS 7.
One good measure of the current market potential for iTunes Radio is the number of people who use iTunes. A recent NPD Group study says 67 million Americans use iTunes. Anybody who uses iTunes -- on a mobile device, laptop or desktop -- can listen to iTunes Radio.
An even smaller group of people has proven to use iTunes for music. According to NPD, 19.4 million people purchase tracks at iTunes while 6 million purchase digital albums. Let's assume there's a lot of overlap in the two figures (people who buy digital albums are probably going to also buy tracks) and say roughly 20 million Americans buy music from iTunes.
Relative to 67 million iTunes users in the United States, 11 million iTunes Radio listeners in the first five days is a great start. But those 11 million early adopters look even better when compared to 20 million iTunes music buyers. It appears a good portion of the consumers most interested in digital music were quick to try out iTunes Radio.
There’s a lot of potential here. iTunes isn’t even reaching maximum penetration in the United States. More than half of all US homes, or roughly 67 million homes, has an Apple product, according to a 2012 CNBC poll. Because the average home has 2.6 persons, it would appear not all Apple customers are using iTunes. A free radio station could help increase iTunes usage.
One particularly good sign is the regions interested in iTunes Radio. Google Trends shows U.S. searches for iTunes Radio coming from states like Montana and Iowa in addition to typical early adopter states like Oregon and California. That's a sign of a mainstream product.
But iTunes Radio has a long way to go. A quick 11 million listeners -- we'll have to wait and see how many of them are still using the service next month -- is far from Pandora's 72 million listeners. The next 11 million listeners could take much longer. Many of the early adopters were no doubt the result of the heavily publicized iOS 7 launch. Pandora shares fell $2.70, a 10 percent drop, to $24.29 by late afternoon on Monday. Its stock has traded between $7.08 and $27.50 in the past 52 weeks.