Apple's (AAPL) iTunes Radio: It's Not (Necessarily) About the Music
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On Monday, Pandora (NYSE: P) CEO Joe Kennedy said that Apple's (Nasdaq: AAPL) iTunes Radio was a "very basic feature." He noted that the expansion of iTunes added features have been available from other companies "for years."
Indeed, one JPMorgan analyst called the debut "underwhelming," citing lack of color on features and expansion plans.
The debut might hint that Apple isn't planning to promote iTunes Radio right out of the gate. With some 300 million iTunes users, the base for the service is already there. At $24.99 per year for an ad-free experience, the cost isn't too high either.
Pandora isn't likely to lose market share, particularly with its mobile app available on both iOS, Google (Nasdaq: GOOG) Android, and even Microsoft's (Nasdaq: MSFT) Windows Phone platform. Aside from availability, Apple has given little reason for users to switch over.
Maybe Apple is taking a Netflix (Nasdaq: NFLX)-like approach to music for now? Netflix CEO Reed Hastings has famously said his company isn't looking to put cable operators out of business, but simply supplement cable content. At $7.99 per month in the U.S., most consumers don't see the cost as too-high for a separate subscription, especially given that cable bills regularly run over $100 in today's market.
Apple is likely aiming more for song sales given the ad-supported nature of the free program and low-cost of the ad-free platform.
Most of all, however, Apple wanted to create another level of "stickiness" which will keep users in the iOS/OS X/Safari ecosystem. Down the road, that will drive more and more hardware sales, a market which still has robust margins for Apple.
For now, Pandora shareholders don't have to worry. Should Apple push a little harder for broader adoption of its music services, then Pandora shareholders might want to re-evaluate positions.
Both Pandora and Apple are higher early Tuesday.
Indeed, one JPMorgan analyst called the debut "underwhelming," citing lack of color on features and expansion plans.
The debut might hint that Apple isn't planning to promote iTunes Radio right out of the gate. With some 300 million iTunes users, the base for the service is already there. At $24.99 per year for an ad-free experience, the cost isn't too high either.
Pandora isn't likely to lose market share, particularly with its mobile app available on both iOS, Google (Nasdaq: GOOG) Android, and even Microsoft's (Nasdaq: MSFT) Windows Phone platform. Aside from availability, Apple has given little reason for users to switch over.
Maybe Apple is taking a Netflix (Nasdaq: NFLX)-like approach to music for now? Netflix CEO Reed Hastings has famously said his company isn't looking to put cable operators out of business, but simply supplement cable content. At $7.99 per month in the U.S., most consumers don't see the cost as too-high for a separate subscription, especially given that cable bills regularly run over $100 in today's market.
Apple is likely aiming more for song sales given the ad-supported nature of the free program and low-cost of the ad-free platform.
Most of all, however, Apple wanted to create another level of "stickiness" which will keep users in the iOS/OS X/Safari ecosystem. Down the road, that will drive more and more hardware sales, a market which still has robust margins for Apple.
For now, Pandora shareholders don't have to worry. Should Apple push a little harder for broader adoption of its music services, then Pandora shareholders might want to re-evaluate positions.
Both Pandora and Apple are higher early Tuesday.
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