Apple Inc. (NASDAQ:AAPL) first came out with its well known iTunes media player 12 years ago. Since then it has gone on a massive spree of innovation, growth and profitability, with most of its revenue now coming from gadgets like the iPhone and iPad. But it’s come to investors’ attention that Apple is going back to creating another service focused on music just like its original iTunes, dubbed iRadio. I should mention that “iRadio” is not any official name given by Apple Inc. (NASDAQ:AAPL) but rather the name given by outsiders, and iradio.com is not owned by Apple.
What is iRadio all about?
While there are plenty of blogs and news portals reciting the same rumors, at this stage little is actually known about Apple Inc. (NASDAQ:AAPL)’s iRadio venture. No Apple spokesperson has commented (merely stating that it’s not their policy to comment on “rumors and speculation”), and thus we only have second-hand information at this stage. It is my understanding that The Verge (a technology and news media network) is the primary cause of iRadio hype and speculation, having stated the following (I am unable to verify any of these claims):
“Now multiple music industry insiders have told The Verge that significant progress has been made in the talks with two of the top labels: Universal and Warner. One of the sources said “iRadio is coming. There’s no doubt about it anymore.” Apple is pushing hard for a summertime launch.”
Assuming iRadio really is going to eventually come to existence, all we really know about it for now is that it will serve as some kind of competitor to Pandora and Spotify. These are services that allow users to stream music online, and then optionally purchase songs they like at online retailers. Pandora is the more popular of the two and is entirely free (although there is the option to pay $3.99/month for an ad-free version), and unlike Spotify, it has an advanced suggested-song algorithm that recommends new music to the user based on their current favorites and tastes.
While Spotify is not publicly traded, Pandora is, and we can dig into its numbers. Recently Pandora announced that it now has over 200 million members, and in its fiscal year 2012 results it was reported that revenue for 2012 was $427.1 million, up 56% from last year’s revenue. Even more impressively, total listener hours in 2012 were up 70% to 14.01 billion hours. Yet despite these numbers, Pandora has ran at a loss, and some argue that it will never be profitable due to the heavy costs involved in acquiring content and paying labels and artists.