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Report: Apple holding music service talks, mulling Android iTunes app

  • Billboard reports Apple (AAPL) has "opened exploratory talks with senior label executives" about launching a Spotify-like music streaming subscription service, and is also thinking about offering an Android iTunes app.
  • Apple is also said to be weighing other efforts to support iTunes music sales, such as offering exclusive digital album-release windows, as it contends with a shifting digital music landscape.
  • Trade group IFPI estimates global music streaming and subscription service revenue rose 51% in 2013, and that download revenue (still 2/3 of all digital revenue) fell 2.1%. Apple's iTunes music ARPU has declined sharply in recent years amid a shift in user spend towards apps.
  • The launch of an Android app would be a first for Apple, whose mobile app launches have been iOS-only to date. If the app supported iTunes Radio, it would be a negative for Pandora (P), which thus far has been successful at dealing with iTunes Radio's challenge. P -1.4% AH.
  • The report comes amid growing signs Spotify is prepping for an IPO.
Comments (44)
  • Maciej Kedzierski
    , contributor
    Comments (21) | Send Message
     
    First company in the world that would breach their own moat
    21 Mar, 05:31 PM Reply Like
  • inside man 55
    , contributor
    Comments (668) | Send Message
     
    Microsoft has the honor on that one. They have sold Windows Phone and Surface users down the river so many times to favor their competitors.
    21 Mar, 05:35 PM Reply Like
  • Maciej Kedzierski
    , contributor
    Comments (21) | Send Message
     
    You're right... my bad
    21 Mar, 10:01 PM Reply Like
  • SpinyNorman
    , contributor
    Comments (214) | Send Message
     
    Not really. Smart companies realize it's better to cannibalize your own products before the competition does.

     

    As smartphone growth slows and turns into a mature replacement market, the content business will become much more important for Apple. Boosting content sales at the potential expense of hardware sales doesn't seem so crazy to me, especially given the loyalty of Apple's customers and the factors that drive Apple hardware sales (more to do with cachet than content available, especially in places like China and India where the remaining growth is). I don't think they'd really lose too many hardware sales by offering iTunes for Android.
    22 Mar, 10:24 AM Reply Like
  • Dennis Baker
    , contributor
    Comments (1075) | Send Message
     
    This rumor makes no sense.

     

    Apple isn't a streaming media company, the only reason Apple would sell software on android is if it somehow helped sell Apple hardware the way iTunes helped sell iPods and iPhones.

     

    What exactly is iTunes on Android helping Apple sell?

     

    Unless there is a reasonable answer to that question, it's just not going to happen. Apple's goal is to make great products... Not to become the biggest streaming media company.
    22 Mar, 11:57 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (584) | Send Message
     
    If a consumer likes iTunes, his next phone can be iPhone instead of Android. In the opposite scenario, if Apple loses a customer to Android, at least it will continue to collect revenues through iTunes. What's wrong with this logic?

     

    Google creates apps for iOS. It makes perfect sense that Apple will build apps for Android.
    23 Mar, 12:37 PM Reply Like
  • Dennis Baker
    , contributor
    Comments (1075) | Send Message
     
    Maybe. It's a slim reward for something that goes deeply against the grain of the way Apple does business.

     

    I just can't see Apple chasing whatever marginal revenue they would get from supporting Android when it effectively undermines part of the competitive advantage the iPhone has.

     

    Now if there were some other part aside from selling iTunes, then it's possible. Maybe they will build support for Apple TV into Android, which would help sell Apple TV. Even that seems unlikely though.
    24 Mar, 02:21 AM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    I agree Dennis, it is a watershed moment. After better than a decade of ignoring all competitors and just building *within* the walled garden Apple is realizing that their high margin / expensive hardware has conceded so much market share that they are going to lose content sales unless they take some drastic measures (i.e., writing an Andoid app). I'm not so sure it is going to work, but at least one commenter on here is an Android user who is excited about iTunes coming. And we can all remember Apple selling a lot of iPods to Microsoft users by writing iTunes for Windows, and had Apple not made this move the iPhone would never have become so popular.

     

    But what this announcement really does is validate streaming even more than the Google All Access and iTunes Radio launches already have. CD sales peaked way back in 1998 (now down -72% from that peak), but guess what? iTunes sales peaked in 2012, 2 years ago. And satellite radio usage saw it's first decline in 2013. Streaming on the other hand? Up 50% in 2013.
    24 Mar, 09:57 AM Reply Like
  • manicdvln
    , contributor
    Comments (579) | Send Message
     
    R.I.P. Pandora, you won't be missed.
    21 Mar, 05:42 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (11014) | Send Message
     
    Pandora will be fine. Also, you may note Apple is now the follower not the leader.
    22 Mar, 11:25 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (584) | Send Message
     
    There were phones before iPhone and tablets before iPad. Don't underestimate the power of Apple and its brand.

     

    We can argue Apple vs. Google vs. Microsoft vs. Amazon. But Apple AND Google AND Microsoft AND Amazon combined vs. Pandora?
    23 Mar, 12:40 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    But it's not Apple AND Google .... it's Apple vs. Google vs. Microsoft vs. Amazon in the arenas of hardware, software, search, maps, ecommerce, movie/TV, etc etc AND in music vs. Pandora. What usually happens is the one that is laser focused succeeds.
    23 Mar, 08:20 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (584) | Send Message
     
    Pandora's executives are laser focused on selling their shares in the company - twice a month, like a clock. Pandora has not released any new features (of any substance) in years.
    24 Mar, 11:42 AM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    <<new features>>
    P is so far ahead of any competitors feature-wise, they instead can (and are) focusing on growth and monetizing, and are succeeding (opening new local ad markets, receiving MRC accreditation for audience measurement, favorable rulings from ASCAP that "P is radio" that will reduce costs and far more importantly provide a precedent for BMI and SoundExchange performer negotiations, more car integrations, etc).
    24 Mar, 11:52 AM Reply Like
  • RattyUK
    , contributor
    Comments (381) | Send Message
     
    "The launch of an Android app would be a first for Apple, whose mobile app launches have been iOS-only to date."

     

    Not really "First for Apple" like when Apple released iTunes as a Windows app.
    21 Mar, 06:06 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (584) | Send Message
     
    First *mobile* app.
    21 Mar, 11:12 PM Reply Like
  • MJ Pragmatist
    , contributor
    Comments (103) | Send Message
     
    iTunes became super successful in the first place because it supported non-Apple products (i.e. Windows). I think they could do the same with their streaming app without hurting their iPhone sales. I'm not sure about iTunes although the two do go together somewhat.
    21 Mar, 06:08 PM Reply Like
  • DanoX
    , contributor
    Comments (2577) | Send Message
     
    Ha..Ha..Ha..Would be waste of time and resources.
    21 Mar, 08:42 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (584) | Send Message
     
    I hope that Nokia MixRadio follows suit and becomes available for Android and iOS.
    21 Mar, 11:13 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (584) | Send Message
     
    The bigger threat to Pandora is the exclusivity that Apple wants from the labels. Apple can pay/push for it, Pandora can't. A few hot releases available exclusively on iTunes Radio (even for a month), and millions of users will decide to at least try it. Many will switch, but in either case Pandora will lose a lot of listening hours, i.e. ad revenues.
    21 Mar, 11:16 PM Reply Like
  • maximvs3
    , contributor
    Comments (4) | Send Message
     
    I don't see it as a threat to pandora. I am a self-declared apple fanboy but itunes radio is not mature, my default music streaming app is still pandora hands down! While I know itunes radio will mature, pandora has a prestige and a reputation for being leader in its sector and I will continue to use it!
    22 Mar, 05:30 AM Reply Like
  • manicdvln
    , contributor
    Comments (579) | Send Message
     
    prestige in nothing.

     

    Lowest library of songs, no ondemand, US restricted, no offline caching, no exclusive content, owns nothing, can't even save a favorite song for replay not even as good as radio since it has no news or sports but with added cost of data fees. I don't call any of that prestigious.

     

    Let's be frank, only reason Pandora got larger market share was because they were on of the first offering free with ads. From the likes of increasing sub price it seems that model isn't working. Freeloader teenagers with no income don't care about the ads Pandora trying to sell. Companies will never get back their ROI.

     

    And a third party metric research emarketer said they see Pandora mobile ad revenue declining.
    22 Mar, 02:05 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    @maximvs3,
    Completely agree. Personally, my fanboy-ness has been in decline ever since Apple Maps, iBooks/Kindle fight, and Siri (so promising, and yet, so unfulfilled, Wolfram Alpha, lol). When I consider Google Maps and Google Now, this may be my last iPhone. Though still think MacOSX is awesome, and so still long AAPL stock. But for music, P is so much better than iTunes Radio it's not even funny. 6 months after iTR launch and the playlists are still bad bordering on complete random, and still buggy, personally had multiple quits in the middle of a song, also had a new station I created that won't play, no idea why. I'm sure they will fix these bugs, but the iOS7 release was pretty buggy as well! Also, iTR still only has a few national ads: McDonald's (LeBron's bacon club house), Nissan Rogue, Hilton, and of course, iTunes ("buy the album now!" -- so laughably out of touch, becoming more like Microsoft everyday!). And they are targeting higher ad-load than P from my trial, maybe because their licensing rates are higher? They certainly have the money to crush P, but they aren't doing it, and in reality it might be cheaper (and easier to get to scale) for AAPL (or MSFT) just to buy Pandora!
    22 Mar, 07:30 PM Reply Like
  • kata
    , contributor
    Comments (441) | Send Message
     
    Why doesn't Aapl just buy Pandora. What else are they going to do with all that cash? They don't seem to know what to do with it. Aapl is starting to look like the old Msft, a company that couldn't get out of its own slow lumbering way and refused to seize the future. Now Msft is getting lean and mean and Aapl is thinking about how to stay relevant. Who would have guessed it, lol.
    22 Mar, 10:01 AM Reply Like
  • nguyenvanphuoc
    , contributor
    Comments (366) | Send Message
     
    "Now Msft is getting lean and mean and Aapl is thinking about how to stay relevant. Who would have guessed it, lol."

     

    Yes, Apple is having a lot of trouble staying relevant. You hardly ever hear anybody say 'iPhone' anymore. Or iPad. Or iPod. Or iTunes.
    22 Mar, 11:24 AM Reply Like
  • gwaterloo
    , contributor
    Comments (102) | Send Message
     
    i hear from my son and his friends that spotify is much better than pandora because you can select the specific song you want to listen to on spotify but that you can't on pandora. is this true and even without apple entering, is there any reason why pandora does not allow the same to be done on their service ?
    22 Mar, 10:14 AM Reply Like
  • manicdvln
    , contributor
    Comments (579) | Send Message
     
    Pandora can't because of legal issues involving their deals with licensing their music service as radio.
    22 Mar, 02:09 PM Reply Like
  • bgold1955
    , contributor
    Comments (1935) | Send Message
     
    Spotify appears to appeal to those that are music aficionados (mostly young). My son too uses Spotify & when he plays it I am not impressed with selections available and would rather listen to artist mixes like provided in Pandora or iTunes Radio. I do believe Spotify has a market, just not for me at current stage of life.
    22 Mar, 03:27 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (584) | Send Message
     
    @bgold

     

    Spotify has 20 times more music than Pandora, and it has ALL the music that Pandora has. You need to talk to your son again.
    22 Mar, 03:45 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    @gwaterloo,
    @manic is correct, on Pandora you can't pick what song will play, but this is by design, P is radio, it picks the music for you (you also can't repeat or rewind, but you can skip and thumbs up/down to tailor the station to your tastes). But the royalty payments for this service are far less (about 1/3) of what Spotify has to pay to stream, and this is reflected in the cost of a subscription as well, $4-5/month for P and $10/month for Spotify.
    22 Mar, 06:25 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    @Andrei,
    P's library is 1M songs, if you play it continuously 24/7/365 it would take 7 yrs to hear it all without ever repeating a song, and they are adding more all the time. Let me ask you, who cares that Spotify has 140 yrs worth? No one lives that long! (And trust me, there are songs in that library that you would be grateful to have never heard!) Do you really think this additional "variety" is going to trump other discriminators when people chose which service to use? Discriminators like say, the playlists that are served to the listener?? Or maybe, ease of use? Or independence on the various platforms that one might use (iOS, Roku, Google Chrome, Sonos, etc). The size of the library is a non-issue! You really should stop trotting this out as an argument for your short, it makes you look desperate.
    23 Mar, 12:48 AM Reply Like
  • 8046601
    , contributor
    Comment (1) | Send Message
     
    The size of Spotify's library means you'll basically always be able to pull up what you're looking for. There is massive value in that and why many of us will pay $120 a year for Spotify as a comprehensive music solution.

     

    If your numbers are right then Spotify is 20 times more likely to have a piece of music than Pandora. Obviously it matters less on Pandora because it's radio but to claim Spotify's library isn't important is ridiculous.
    24 Mar, 02:11 AM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    Wow, Apple getting desperate! First iTunes Radio (their *attempt* at a Pandora clone), now word of offering it as a standalone app (as if that’s the reason so few are using it, what happened to the advantage of owning the iOS platform??), now they are locking Pandora out of AppleTV and CarPlay. Now Apple is attempting to strong-arm record labels into giving them exclusives, in talks to develop a Spotify clone, and an Android app???!!! Android users left Apple’s “walled garden” for a reason! This is a non-starter! (how many Google users use Siri, or Apple maps?)

     

    It’s not helping that Apple got slammed in the recent Pandora-ASCAP ruling, Judge Cotes finding iTunes Radio as not radio, but merely a vehicle to “promote sales of Apple products”. http://bit.ly/1oKNW11 Apple is realizing competing with Pandora on the ad front is going to be difficult at best, and that as a pass thru for iTunes sales, a complete failure.

     

    This isn't R.I.P. Pandora, it's R.I.P. iTunes. Apple has (finally) come around to the fact that the streamers have been right all along, that people prefer renting music to owning it. This is nothing more than a hail mary attempt by Apple to stem the bleeding of their deteriorating digital music sales (which according to Neilson Soundscan has accelerated to double digit declines in early 2014), all at the hands of Pandora and Spotify.
    22 Mar, 12:20 PM Reply Like
  • manicdvln
    , contributor
    Comments (579) | Send Message
     
    You should have sold at 40$, dgulick. Now you slowly watch your gains fade away when this garbage goes back to 10$ in a few months.

     

    When I said, Pandora doesn't own the OS of any platform, they will never be able to compete, this what I was trying to teach you. Big tech will simply squeeze out Pandora from competition. Apple can do anything it wants, it has the money, influence and prestige to bend any rule or competition to their will. It's just matter of time until the big 3 and new big fish like Amazon, Beats and Spotify eat away of all Pandora's miserable ad revenue.

     

    What can Pandora do other than create a useless timer in their app and call it innovation and hope for the best.
    22 Mar, 02:14 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    Lol, 20/20 heinsight, so easy! Lets see if I can do that: @manic, you should have bought back in Nov at $26 when you first shorted the stock -- you'd be up +30% even after this slide! But let's let the past be the past and talk about the future: you have a golden opportunity right now to cover before March metrics come out and disproves the "slowing" growth story due to all of the "competition" that the news keeps parroting in every story I read. I see a re-acceleration of P's growth (which will also get parroted) as P faces no launches or promotions in March (so a "clean" month) and by my model they add 1.3M new active users and stream 1.7B hrs, an all time high, up +13% y/y (reversing last months "declining growth" of only +9% y/y in Feb), which is 9.1% of US radio share (up from 8.9%), trust me, this will be news and the stock will be heading up, especially as I'm sure short interest is growing with this slide. Follow that news with a quarterly report on 3/19 where they up guidance (you must admit, they set the bar pretty low in the prior report).
    22 Mar, 07:04 PM Reply Like
  • manicdvln
    , contributor
    Comments (579) | Send Message
     
    You going to lose just your profits soon! Keep being stubborn, short interest is historical all time low. http://bit.ly/10qen1h

     

    You have to start admit that you institutions who own 99% are getting out, they dont give a crap about Pandora, they pumped and now they dump.

     

    Down 10$ in 2 weeks from 40$ peak, at this rate will be back to 10$ by mid april.
    24 Mar, 11:06 AM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    I sold some a while back, and just bought back today (normally don't play short term, but this drop is unreasonable, stop losses triggered), hopefully you shorted at 40 and just covered, then we both made money! March metrics are going to be good, and I think the quarterly is going to beat, play it as you see fit @manic. Best of luck.
    24 Mar, 11:30 AM Reply Like
  • Andrei Volgin
    , contributor
    Comments (584) | Send Message
     
    It's not about metrics anymore. It's about the hot air coming out of the bubble stocks across the board.
    24 Mar, 11:44 AM Reply Like
  • manicdvln
    , contributor
    Comments (579) | Send Message
     
    You full of crap, march metrics will be worse and they lowered guidance for a reason, raising sub fee is not a positive sign and courts decision to keep rate at 1.85 and which Pandora already stated is unsustainable not helping either.

     

    When is the last time Pandora made a new ad partnership this quarter? Oh yeah never.

     

    Apple going to crush Pandora like the cockroach that they are. Management reshuffling is execs bailing before SEC comes knocking at their door. Every insider is dumping their shares and some more. This is not, omg I need a 100k to survive, these are tens of millions of dollars being dumped. Doesn't seem like a bright future to me. Seems management knows that Pandora is overpriced and they selling as much as they can as soon as they can before it goes back to 10$ on institutional pump and dump.

     

    You think the dumping is over from todays 10% drop? Guess again, from the look of index to get back to their support line, and the current rate of the sell off. Pandora has another 20$ downside if markets hit support levels and even worse if support on indexes are broken and we finally get a correction now that the cat is out of the bag with Feds interest hike coming not too far in future.
    24 Mar, 12:35 PM Reply Like
  • Mr. Durden
    , contributor
    Comments (24) | Send Message
     
    Gotta say, I've never seen someone that much in love with a stock. Plus, the way dgulick tries to spin off every piece of bad news as good news just makes it more hard to watch. In the back of his mind I think he knows this will not end well, but swallowing your pride is something that most people have a hard time doing. Myself included.
    24 Mar, 03:47 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    <<In the back of his mind I think he knows this will not end well>>

     

    Sorry Mr. Durden, not really, I've tried them all and they aren't as good as Pandora. I wouldn't say I love the stock so much as I love the genome concept, it's genius, been a Pandora user for 7+ years. Though back then, with desktop the only Pandora option it was for discovery only, most of my music listening through an iPod. But when I lost a hard drive with my entire music library (still had the CDs but no interest in ripping them again! also lost some iTunes purchases, but most of them were just taking up space, never listened to them) it was a "eureka" moment that streaming through the cloud would be the future of music listening. P is a marriage of the simplicity of radio but with playlists that are easily tailored to your musical tastes.

     

    But now that the entire music industry is in agreement on this and are offering competing services, they will find they can't "crush" P even if they wanted to, they waited too long and P's foothold is too great. We already have evidence of this, months after many of these competitors have launched (some of them heavily advertised/publicized), P's growth has barely taken notice. Sure, those competitors will snag some new streamers as there are still many that will be transitioning from digital music purchases ($5B/yr globally) and CD buyers ($8B globally) but P can entice them as well with a better product and a huge lead in integrations, P literally available everywhere (why waste time tailoring a station on iTunes Radio that I can't play on my Roku or Sonos or Xbox or in my car?). P also has lower royalty costs and a lead in local ad sales that will allow them to be more profitable with a smaller ad load (local advertising, 75% of the $17B/yr FM ad market and something that competitors as of yet are barely pursuing).

     

    No, I'm not "spinning" bad news, I truly believe it is not bad news.
    24 Mar, 06:13 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    Oh, and not sure what is "hard to watch", you guys know how long I've been in P, doing just fine thanks. But shares aren't done yet -- will be interesting going into this summer as P's continued growth sheds a light on the lack of any real competition. What if P starts licensing the genome and ad selling the way Slacker is doing for Samsung's Milk? Could be added as a front end to Google or any of the on-demand services, hmmm....
    24 Mar, 07:37 PM Reply Like
  • Rich in NJ
    , contributor
    Comments (28) | Send Message
     
    Macquarie speculated today that by 2020, iTunes could account for 30 percent of total sales.
    22 Mar, 01:43 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    Due to Apps and TV, not music:

     

    "Despite our expectations for music to continue to be a headwind, new innovations around Apple TV and a potential Apple television could help drive more iTunes non-App content."

     

    http://on.barrons.com/...
    22 Mar, 07:37 PM Reply Like
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