Apple(s AAPL) is reportedly looking to build its own web radio service through iTunes, something similar to Pandora.(s P) Both the Wall Street Journal and the New York Times have reports that say Apple has started talks with music publishers for the appropriate licenses that would allow it to pursue such a service. It sounds like Apple basically is looking to apply its “genius” function to music in the cloud. And with the rise of customized, streaming music services, it’s possible Apple is looking for ways to defend its music turf.
We know Apple is looking to integrate iCloud and iTunes. Apple knows what music you like based on iTunes downloads, and it knows what music you listen to most. It could try to take that data and recommend songs that stream via iCloud like a radio instead of only recommending songs to purchase, which iTunes already has. It could be that Apple is paying attention to trends that show a lot of people are starting to feel about music the way they feel about digital video content: they want it, they just don’t care if they own it.
The WSJ says Apple’s considered different ways to customize music services before. Here’s how the current idea, again still in the early negotiation stages, would work:
The company has in the past contemplated and abandoned other interactive features, including a Spotify-like service that would have let users rent unlimited amounts of music for a fixed monthly fee. But people familiar with the current talks say they appear to be more serious than those previous tentative inquiries.
As on Pandora, the music would be interspersed with ads, in this case carried by Apple’s iAd platform, which syndicates ads to iPhone and iPad apps.
Building such a service has its risks. While Apple’s success with iTunes is inarguable, its record is spottier when it attempts to build services tangential to iTunes: both Ping and iTunes Match fell flat. And Podcasts, even now upgraded, has some users incredibly frustrated.
But if it wants to avoid being disrupted or out-innovated, it probably feels it has to try something. Apple is very likely aware of its vulnerability when it comes to iTunes: It’s clunky software that encompasses so much more than music: it’s videos, apps, podcasts, iTunes U and more. Apple could be looking for a fresh way to appeal to users who’d rather use a simple, music-focused app customized to their music preferences like Spotify.
Though web radio is popular, it doesn’t make that much money. Luckily for Apple it has a lot of that already; plus Apple might not have a choice if it wants to keep music lovers around.
iTunes’ share of individual songs is still 85 percent of the digital music market. But with the popularity of Spotify, Pandora and others, Apple probably wants to find a way to keep its customers from wandering outside its ecosystem because it has no cloud-based music streaming service. Which is, of course, pretty much Apple’s basic M.O., as seen with the moves it’s made in iOS 6, OS X Mountain Lion and iCloud: don’t give customers a reason to go anywhere else.