Apple announced in June it would enter the streaming radio business, taking on Pandora, Slacker, iHeartRadio and others who have been in the space and vying for both mobile and radio advertising dollar, as well as the growing migration of radio listening from traditional AM/FM to Internet streaming. Nearly half, or 48%, of iTunes users who bought a music download from iTunes in the past three months also listen to Pandora, Spotify, or other internet radio or an on-demand music service, according to NPD Group. The most popular of those is currently Pandora, which claims 42% of iTunes users. Apple's entry is a bid to claim at least part of that large and growing audience.
iTunes Radio will be a litmus test for Apple's fledgling iAds business, which has struggled so far against Google, Facebook and even Amazon.com in the brutally competitive digital advertising space.
But unlike its rivals, Apple relies primarily on its hardware business to make money -- with all other endeavors, including music, providing a supporting role. The Cupertino, Calif., company spent much of its press conference highlighting the capabilities, and rainbow colors, of its new smart phones -- the iPhone 5S and its budget-minded, plastic sibling, the 5C, which starts off at $99 with a two year cell phone contract.
Business Matters: Apple iTunes Radio Vs. Downloads and The Innovator's Dilemma
To show off the capabilities of the more premium iPhone 5S and the ability of its new A7 chip to process real-time accelerometer, gyro and compass data, Apple turned to games and video, rather than music.
Apple's Chief Executive Tim Cook did give music a nod at the end of the press conference, inviting Elvis Costello to perform on stage -- continuing a tradition under the company's erstwhile CEO, Steve Jobs, to end its events with a brief concert. Costello, ever the iconoclast, performed "Radio Radio," a ballad decrying the homogenization of corporate radio with lyrics saying, "The radio is in the hands of such a lot of fools, tryin' to anesthetize the way that you feel."
Investors initially weren't feeling much enthusiasm for the company's announcements. Amid a modest stock market rally, Apple's shares dropped more than 2% in later afternoon trading following the press conference.
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