Peter Kafka

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Why iRadio Could Be a Hit for Apple and a Dud for Big Music

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Asa Mathat | D: All Things Digital

It took a while, but Apple is finally ready to announce its iRadio service. It should get a formal introduction at Apple’s WWDC event today, and a launch later this year.

We don’t know if Apple is actually calling iRadio “iRadio.” But at this point we do know quite a bit about the streaming music service:

  • Apple has been trying to launch it since last fall, but only started getting the formal backing of the big music companies in the last few months. Sony, the last big holdout, signed on late last week.
  • iRadio is meant to be a “Pandora-plus” offering: It will be free, and will give listeners more control over their music than Pandora or other Web radio services, but not as much as paid subscription services like Spotify or Google Play Music All Access (they really call it that).
  • Like most digital music services, Apple will pay the music owners a fraction of a penny every time someone plays one of their songs. Unlike most digital music services, Apple also plans to sell advertising, and will give music owners a cut of that, too.

If you’re trying to gauge iRadio’s prospects, it’s that last part that should be most interesting. Because it sets up the possibility that iRadio could work very well for Apple — by creating a sticky feature that keeps people using its iOS platform instead of jumping ship to Google/Samsung/Amazon/whomever — but end up disappointing music owners, who are still looking to replace the giant pile of money that Napster and file-sharing evaporated way back in 1999.

The problem: If Apple wants to generate real ad money for iRadio, then that means it has to try to crack the market for radio ads. And that is a very, very un-Appley business.

Radio is a $14 billion industry that has proven remarkably resilient to digital. It doesn’t really matter what kind of precision targeting the Internet offers — the bulk of that $14 billion comes from local ad sales, which means you need to get ad reps reaching out to car dealers, grocery stores, etc.

And it’s a slog. Pandora, by far the biggest player in Web radio ads, has been diligently trying to build out an ad business for a long time. It is on track to do something like $630 million this year. Google and Yahoo have both tried digital audio ads, and bailed out.

Meanwhile, Apple’s previous forays into ads, which started off when the company bought Quattro three years ago and launched iAd, haven’t amounted to much. And at the D: All Things Digital conference last month, CEO Tim Cook sounded profoundly unenthusiastic about ads.

Again: Apple could end up with a goose egg for iRadio revenue and still consider the service a success. If iRadio helps sell more iPhones, or keeps iPhone users from ditching their handsets for a Google X phone or whatever, then it’s well worth the hassle. But it’s hard to see this making real money for the people who own the songs.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik