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Op-ed: Why it makes sense for Apple to plan a Pandora rival

We already have plenty of music streaming options, but none go through Apple.

On Thursday this week, the Wall Street Journal published information claiming that Apple is working on a Pandora-like music service to allow iOS users to create custom radio stations to stream wherever they go. The New York Times soon followed up with its own report on the story—citing its own sources—claiming the service would likely come as a preinstalled app on iOS devices that could determine a user's tastes based on what was purchased from their iTunes accounts. The WSJ indicated the service would also be available on Macs and PCs, but probably not on Android devices.

For those who have followed Apple news and rumors for years, this one sounds familiar. That's because rumblings about Apple's alleged plans to launch a streaming/subscription music service date back to (at least) 2007, when Apple apparently indicated to INTENT MediaWorks CEO Les Ottolenghi that a subscription music service—as opposed to iTunes' current download model—was imminent. The rumor popped up years later when it was believed that Apple would charge $10 to $15 per month for a music subscription.

These rumors were only bolstered by Apple's 2009 acquisition of CD-trading-turned-music-streaming service Lala, even though Apple later tried to "clarify" that it didn't want to undermine its download options by launching any kind of cloud streaming option. The company eventually rolled out iTunes Match in late 2011, which allows users to listen to their iTunes-purchased music over the cloud on supported devices (iOS devices, Macs and PCs with iTunes, and Apple TVs).

But iTunes Match is no Pandora, or Last.fm, or Rdio, or Spotify. It's mostly dependent upon the customer continuing to purchase individual songs from the iTunes Store, though users can also use iTunes Match to match ripped MP3s. When all you want to do is choose a genre or song to start from and be taken on a musical journey from there, the options available from Apple are limited. That's part of why services like Pandora (and now Spotify Radio) have gained such popularity in recent years—many people who were once dedicated iTunes buyers have since moved onto one of the many streaming services available to us.

Hell, even my physical therapist told me that she, her friends, and her colleagues had all switched away from buying iTunes music to listening to Pandora. Even if Pandora isn't your streaming service of choice, it's clear that even the general public is beginning to look at other options.

And that's the most likely reason why Apple would want to follow suit. The Times cited analyst Michael Pachter asking what's in it for Apple: "Pandora already does a great job, so does iHeartRadio, so does Last.fm. Why do we need another one?"

The answer is because Pandora, iHeartRadio, Last.fm, and the others aren't feeding money through Apple. It doesn't matter that advertising in audio streams—which Apple is rumored to be planning for its Pandora clone—doesn't bring in much revenue, and it matters even less that all these services already offer apps for Apple's products. The Times report estimates that the Internet radio business accounts for "less than $1 billion a year in revenue," but that's $1 billion that Apple is currently getting no part of.

If it's true that Apple is again in talks to launch a streaming service—and I'm inclined to believe that it's at least possible, given the leaks to high-profile publications like the WSJ and NYTimes—then it's most likely because Apple simply wants a slice of the streaming pie. iTunes remains wildly popular (it's still the number one music retailer in the US, after all) but longtime users have wandering eyes. Non-Apple streaming services are breaking into the mainstream and Apple may not want to miss that boat when it comes to bringing in revenue from its millions of iPhone, iPad, and iPod touch users. The fact that we already have plenty of other streaming options is practically irrelevant to Apple, because none of those options keep Apple's user base planted where the company thinks they belong: in Apple's ecosystem.

Channel Ars Technica