Report: Apple is Working on a Streaming Radio Service

According to Bloomberg [via Metal Insider], talks between Apple and the major record labels to launch a streaming radio service have recently intensified, and such a service — which would be a direct competitor to Pandora — could launch during the first three months of 2013.

A foray into the streaming radio marketplace makes a ton of sense for Apple. iTunes is already a very popular destination for music downloading, so the consumer trust and customer base Apple has already built will make it much easier to launch a new service than it would be for a company starting from scratch. They’ve also got existing relationships with labels to draw upon, making the negotiation process easier. And with services like Spotify and Rdio becoming very popular with music fans, Apple sees the writing on the wall that the marketplace is shifting away from file ownership towards streaming.

There’s economic incentive, too; according to Bloomberg, “sales of music downloads are slowing,” although that’s an exaggeration. What’s slowing down is the rate at which sales are increasing. Online digital music sales grew 8 percent in 2011 and 6 percent in 2010, compared with annual growth between 12 percent and 200 percent in the preceding five years, according to the London-based International Federation of the Phonographic Industry. Apple would be seeking to use the new service to drive up iTunes sales of music that listeners discover using the new radio recommendation engine.

It’s important to note that Apple’s service would not be similar to Spotify or Rdio, but rather to Pandora; users would not be able to choose what tracks they want to listen to all the time, there would be skip limits and repeat limits, and the service would function more like a personalized radio station than an on-demand music library.

Apple’s notoriously user-friendly interfaces and ability to instantly penetrate the iPhone, iPad and iPod marketplace could be a huge blow to Pandora. We’ll see. I’m definitely excited to see where this leads.