Apple to Challenge Pandora by Next Year with Online Radio Service

By Karla Robinson
October 30, 2012

Online digital music sales growth has dropped off substantially in recent years, causing record companies and Apple to look for new ways to encourage music discovery and purchase.
According to anonymous sources, Apple could secure deals with music companies as early as mid-November to create an ad-supported music streaming service.
Positioned as a radio service to rival Pandora, Apple’s music offering will be available on its iPhone, iPad and iPod touch as apps instead of using a Web browser. It could reportedly come to devices in the first three months of 2013.
Apple is pushing hard in licensing discussions, trying to get more flexibility and earlier access to new releases, which could provide an edge over Pandora.
“Apple’s negotiations with record labels have centered around advertising, the [sources] said. In addition to an upfront fee, record companies are seeking a percentage of ad sales and the ability to insert their own commercials for artists,” Bloomberg reports. “Apple sees the service as a way to grow its iAd mobile advertising platform, and is exploring ways to integrate iAd with iTunes to steer customers back to iTunes.”
“If Apple offers a radio product, it will be far superior to anything else on the market,” says Rich Greenfield, a BTIG LLC analyst who recommends selling Pandora shares. “They’re seeking direct licenses to avoid all the restrictions that come with a compulsory license.”

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