Taking a Bite Out of Internet Radio:
For more than a decade, Apple has been recognized as one of the most innovative companies in the world. In 2003, Apple revolutionized the music industry with the launch of the iTunes music stores. While there is a lots of competition in the digital music market, Apple still controls about 65% of the market.
In 2007, Apple's market unveiled the iPhone-integrating smart phone technology with their popular iPod interface. However, in recent year, competition from competitors like Samsung has cut into Apple's market dominance. Samsung controlled only 4.% of the smart phone market at the beginning of 2010, but controlled 21.1% by the end of 2012.
In June 2013, Apple announced its intention to roll out the iTunes Radio service in the fall same year. Streaming radio is the fastest growing from of music listening. According to the Recording Industry Association of America, while overall music sales were down in 2012, digital music sales were up by 14%. iTunes Radio has more than 200 stations and the ability, like competitor Pandora, for user to create custom stations to fit their personal musical tastes. The service also integrates with the Siri mobile assistant, allowing users to ask Siri "who play this song?" an option similar to something currently available through Shazam. There is a free ad-supported option for the service, as well as a yearly ad-free option for $24.99.
However, Apple has no shortage of competition in this venture, and they were late to enter the market. Market leader Pandora offers a free as-supported version and a subscription service for $36 per year. Additionally, Pandora is available for Android, BlackBerry, and Window's phone, as well as the iPhone. Pandora is not the only competition. Spotify has more than 20 million licensed songs in its library and Xbox Music has over 30 million choices. Apple's services, in comparison, are built on a library of 26 million songs and builds on the customer loyalty associated with the iTunes Store.
Industry analyst, however, are unsure about Apple's venture into Internet radio. Ken Volkman, chief technical officer at SRV Network concludes "They have a large and loyal customer base established and the capability to be competitive with advertising revenue rates, both providing great incentive for music publishers." Not everyone is convinced. Rocco Pendola, from the finance site The Street, told CNN "told CNN "iTune Radio is a Pandora knockoff. Its absolutely will not come close to Pandora in term of functionality and user experience. It can't possibly do that. Pandora is a 13 year old company....Apple is just doing what everyone else has done-copying it"
While the future of iTunes Radio is uncertain, it is clear that the future of Internet radio is bright. Will Apple surge past its competitors or fade into the background? Only time will tell.
Question for discussion:
1. Identify the external environments of business that will affect the success or failure of Apple's iTunes Radio.
2. What factors will influence the demand for iTunes Radio?
3. In terms of degrees of competition, how would you describe the market for Internet radio? Do you think that this will change in the next five years? Is so, how?
4. To customize your listening experience, Internet radio services collect data on your listening habits. Are you comfortable with this use of "big data"? Why or why not?
5. Do you think that Apple will be successful in this new venture? Do you think that it was wise decision for them to enter the already crowded market?