(UPDATED) Serial music tech founder Michael Robertson (MP3.com, MP3Tunes, Dar.fm) reacts to today's launch of Apple's iTunes Radio launch (full story)
Press speculation says Apple's forthcoming
iTunes Radio is bad for industry leader Pandora, but they're wrong. In spite of
Pandora's difficulties turning
a profit, they are firmly entrenched as the market leader with 8% of all
radio listening. iRadio is a frontal attack on FM radio and will
accelerate the deterioration in their business and pressure the $10/month
services to offer a free tier.
A
default free radio experience built into iPhone's and iPads will quickly
attract millions. The press will cover iRadio exhaustively plus the power of
Apple to pre-install upcoming iOS 7 this fall will lead to millions listening
to iRadio quickly after launch. 60-70% of online radio listening already
originates from a smartphone or tablet and that will accelerate with Apple's
push.
Yet iTunes Radio won't cannibalize Pandora. Pandora has loyal users, tremendous
awareness and a satisfying service. 70 million users a month are already in the
habit of clicking the P logo to hear tune and they won't change even for a
slightly richer service. In addition Pandora is built into hundreds of consumer
electronic devices and does not rely on any special Apple accommodations to get
their app onto devices so that will be unaffected.
Today only 10% of radio listening comes via net services. Thus 90% still use
AM/FM. 9 out of 10 people don't yet realize the huge benefit that net radio
offers compared to classic radio, but the press attention around iRadio will
help educate them. They'll learn that net radio offers virtually unlimited
station choices, ability to skip songs they don't like and ultimately puts them
in control of the audio bouncing off their ears instead of the broadcasters.
FM radio will free the brunt of iRadio's growth and it will only accelerate the
deterioration in their business. Radio is in the midst of a classic analog to
digital migration. (See newspaper, magazines, mail, etc) It is unstoppable
because it gives the consumer so much more control and choices. There's no
question that it will change from 10/90 (analog/digital) to 90/10 because FM
cannot compete with the benefits of internet delivered music. A new feature in
the new iOS which mirrors your iPhone display on a car's dashboard could have a
bigger impact on driving net radio adoption than a new copycat service from
Apple because it makes your smartphone a better car radio.
Others who will fall victim to iRadio's success are music services with no free
tier. Free is the most powerful marketing strategy of all time and that's
especially true with music. Apple's service improves on the free experience by
adding even more user control than Pandora. The hundreds of millions who have
yet to experience net radio will be lured to their free service or others and
never experience those which require a credit card: such as SiriusXM, Rdio,
Rhapsody, Google All Access, Sony Music Unlimited, and Deezer. The credit card
is an enormous barrier to explore. Some young people don't have a credit card
so they'll be forced to the free services and be oblivious to the paid options.
If you can't get a shopper into your store there's zero chance of them making a
purchase. There's unquestionably value in the $10/month services, but it will
be more challenging for those companies to attract initial interest since each
requires a credit card. Some number of those already paying $120/year for music
will reassess that financial commitment in the face of free alternatives.
There's still value in those offerings, but those providers will have to work
hard to keep delivering value.
iTunes
Radio's success as well as other net companies will come at the expense of the
expense of AM/FM station operators whose customers will are abandoning
their dumb car radios in place of the smartphone. Those that
don't offer a compelling free radio experience online will lose out. – Michael Robertson
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