Business Matters: iTunes Radio Starting Strong But Not Yet a Pandora Killer

iTunes Radio is off to a good start, but it’s too early to call it a Pandora killer.
At yesterday's press event, Apple CEO Tim Cook revealed the month-old Internet radio service has attracted 20 million users and has played 1 billion songs. That works out to 2.91 hours per listener, assuming an average song length of 3.5 minutes, in roughly one month. Actually, iTunes Radio had been operating for 34 days before Cook made his speech. Adjusted to represent a 30-day period, and keeping users constant at 20 million, iTunes Radio averaged 2.57 hours per user. 
Pandora does much better. It averaged 15.8 hours per listener Pandora averaged in the 30 days of September, nearly 5.5 times more time than iTunes Radio averaged in its first 30 days (6.1 times Apple's adjusted listener hour figure). Not all of those listener hours come from the United States. A small but unknown number of Pandora's listener hours and active users come from Australia and New Zealand. (iTunes Radio is available only in the United States.)
Pandora has survived competition from Clear Channel, SiriusXM, the radio functions of on-demand services like Spotify and smaller Internet radio services like Songza. Its listener hours grew 18% from September 2012 while active listeners grew 25%. That said, given the first-month numbers, iTunes Radio appears to be a competitive threat of a higher order.
There are a few challenges in weighing iTunes Radio against Pandora. First, comparing Apple's first month to Pandora's most recent month is like comparing apples to oranges. Cook's figure of 20 million listeners captures everyone that has tried iTunes Radio to date. Apple's 20 million figure is most comparable to Pandora's registered users, which surpassed 200 million in April. The 72.7 million users Pandora drew in September represent recurring, monthly visitors. iTunes Radio doesn't yet have recurring, monthly visitors.
Yet another challenge in comparing the two services is the difference in metrics and reporting. Apple reported the total number of songs played of 1 billion while Pandora reports listener hours. To compare Apple to Pandora requires converting Apple's number of songs played into listener hours (or convert Pandora's listener hours into songs played). In addition, the two companies report figures at different intervals. Apple releases information at irregular intervals. (If iTunes Radio is growing well, expect Apple to push out updates from time to time.) Pandora releases information regularly: monthly listener statistics and quarterly earnings.

A good measure of iTunes Radio’s effectiveness will come in two weeks when Pandora releases its October listener statistics. If Pandora puts up good numbers and shows no signs of decline, we can assume iTunes Radio listenership is growing the total audience for Internet radio. If Pandora numbers decline, iTunes Radio will have cannibalized Pandora more than it grew the market.