Apple (NASDAQ:AAPL) is in talks to with record label partners to license their content for a new customized streaming radio service designed to rival efforts from Spotify and Pandora, according to reports.
Citing sources briefed on Apple's plans, both The Wall Street Journal and The New York Times report the computing giant is mulling a multi-platform streaming service that would program content based on users' favorite artists, songs and genres. Sources said the service would likely take the form of a preinstalled application integrated into Apple devices like the iPhone and iPad--the service would also extend to Apple's Mac desktop platform and possibly to PCs running Microsoft's (NASDAQ:MSFT) Windows operating system. One source told The Wall Street Journal the Apple streaming service would not support devices running Google's (NASDAQ:GOOG) Android mobile operating system, underlining the enmity between the two companies.
Like Pandora and Spotify, Apple's radio service is expected to incorporate advertising, with inventory bought and sold via the iAd mobile ad platform. The reports added it is unclear whether Apple would follow the Spotify/Pandora model and offer free, ad-supported services as well as ad-free premium options--it is also unknown whether Apple would share ad revenues with its label partners or pay some other licensing fees.
Sources added that negotiations are still in the preliminary stages--given the record industry's notoriously slow response to new technology and licensing opportunities, it could take Apple months simply to wrap up the necessary agreements, and insiders said it is decidedly unlikely the company will announce the service in time for its Sept. 12 media event, where it is expected to unveil the latest edition of the iPhone. Sources also acknowledged that Apple has mulled streaming media services in the past only to abandon those plans, but said the latest talks are more serious than previous inquiries.
Apple, Sony Music, EMI Music and Warner Music Group all declined to comment. Universal Music Group could not be reached for comment.
Apple's iTunes has dominated digital media download sales for close to a decade, with more than 400 million accounts worldwide, but the streaming music segment is growing: Last month, Pandora reported 54.9 million active listeners, a 48 percent hike over the last 12 months, while Spotify touts more than 15 million active users, including 4 million premium subscribers. But Pandora also reported fiscal second-quarter 2013 losses of $5.4 million, tripling from $1.8 million a year ago as content acquisition costs continued to increase--analysts estimate the Internet radio business as a whole generates less than $1 billion a year in revenue, prompting some to question Apple's interest in the segment.
"What's in this for Apple?" asked Wedbush Securities Analyst Michael Pachter. "Pandora already does a great job, so does iHeartRadio, so does Last.fm. Why do we need another one?"
