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Apple Inc. (AAPL)’s Trying to Keep an Old Business Model Alive

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Apple Inc. (NASDAQ:AAPL) has always prided itself on innovation. The company has long taken the approach of out innovating itself, allowing its new products to make its old ones obsolete.

But if the rumors about Apple’s new iRadio are true, the company is backtracking to some extent. Rather than embrace streaming music on demand, Apple seems to be planning to use its streaming music service to keep an old business model alive.

Apple Inc. (AAPL)

Apple’s iRadio could be launched next week

Various news outlets have reported that Apple is planning to launch its streaming music radio service as early as next week, at the company’s WWDC. Bloomberg reports that the service will function like Pandora (NYSE:P), allowing listeners to streaming ad-supported music based on a relevant artist or track.

Obviously, this poses a threat to Pandora’s business, as its users could opt to defect en masse to Apple’s rival service. Shares of Pandora dropped precipitously on Monday, and if Apple Inc. (NASDAQ:AAPL)’s radio service draws listeners away from Pandora in meaningful numbers, dark days could lay ahead for the Internet radio giant.

Google (NASDAQ:GOOG) and Microsoft have a different take

Rather than take the Pandora route, and offer pure streaming Internet radio, both Google and Microsoft have opted to offer services similar in functionality to Spotify — that is to say, on demand streaming music.

That raises the question: why? Why did Apple opt to follow Pandora’s pure radio format, while its competitors have embraced a Spotify-like subscription service business?

The answer is not terribly complex. Apple Inc. (NASDAQ:AAPL) is attempting to protect an established business: its iTunes music empire. Its competitors want the opposite.

According to Bloomberg, Apple’s radio service will be tightly integrated with iTunes, allowing users to easily purchase and download songs that they hear. In a way, it should serve as an extension to Apple Inc. (NASDAQ:AAPL)’s iTunes business, not a replacement.

iTunes music works to keep customers locked into Apple’s ecosystem

Apple bulls have long argued for the power of the company’s ecosystem. That is, Apple products have certain characteristics that make buyers more inclined to stick with Apple products over rival hardware manufacturers.

A big component of this ecosystem is iTunes, and more specifically, large iTunes libraries. While music purchased on iTunes can be taken to other devices, it’s easier just to stick with Apple Inc. (NASDAQ:AAPL).

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