Apple enters the streaming music game

June 11, 2013: 12:57 PM ET

iTunes radio will work a lot like Pandora, but is the company too late to the big music party in the cloud?

By Ryan Bradley, senior editor

130611111317-itunes-radio-614xaFORTUNE -- The short answer to the above question is no, the longer answer is maybe, and -- if you really want to speculate and think long-term -- the ultimate answer may be that iTunes, in terms of music listening, is irrelevant. Let's back up and break this down.

No, iTunes radio isn't late to the streaming music game at all. It's still early days, in fact, and Apple is a mighty big player and has signed direct deals with all the major labels for its radio station, a feat Pandora (P)  -- currently the most heavily used streaming radio service -- has not managed. Speaking of Pandora -- this is terrible news for Pandora. Digital Music News has an excellent five-point argument for why Pandora will be gone by 2018. The first point, related to all others, has to do with direct licensing. Pandora almost certainly cannot afford to make deals like Apple can, because for Apple, iTunes has only ever been about pushing its devices. iTunes was essential for the iPod and, today, the iPhone, but the revenues from its music sales have been minuscule but vital to the music industry. When all your company does is stream music, well, so far this has not proven to be a great business model.

MORE: 5 questions surrounding Apple's new streaming music platform

Maybe, however, Apple (AAPL) is offering something we're already used to doing elsewhere. Maybe it is, in fact, late to the streaming music game. The reality is that iTunes is a terribly bloated Chimera of a program that many have abandoned as a listening service. Still, today, 63% of all digital music purchased in the U.S. is done so through iTunes, but nearly 100 million (and many more worldwide) don't purchase individual tracks or albums digitally anymore. We're streaming, and we're streaming somewhere else. Further, if you were one of the poor suckers who signed up for iTunes match in the hopes that you could stream your entire library anywhere, you soon realized this barely worked and abandoned it for something else. If you catch a whiff of spite it's because I was one of those poor suckers. Now, since I'm paying for a service I never use, I'll get to try out iTunes radio ad-free. This would be exciting for me if hearing the words "iTunes match" didn't immediately incite violent thoughts.

LISTEN: Fortune Brainstorm Podcast on streaming music

Yes, it's late, because there are now way better ways to listen to music. Spotify, Microsoft's Rhapsody (MSFT), the terribly named Google Music Play All Access (GOOG), and -- as I rhapsodized about on Fortune's podcast -- Rdio, already offer something akin to the passive, radio-like listening experience. TuneIn is a very popular app that patches users in to radio stations all over the world. People are paying for these services, though not in very significant numbers. Not yet, anyway.

It goes back to the initial problem, which is turning a streaming music service into a business. Apple doesn't have to, so it doesn't have to worry as much about the fact that, for music, iTunes isn't what it used to be (the be all end all, basically). But if someone else did become popular enough, and lucrative enough, maybe then Apple would worry. A big if, sure, but it's early days in the streaming game.

Join the Conversation
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.