At this pace, iTunes Radio beats Pandora in a month

Apple's streaming music service notched 11 million unique listeners in just five days. If it can maintain that pace, it will topple Pandora from its seat at the top of the Internet radio market. But that's a big "if."

Apple unveils iTunes Radio at WWDC 2013.
Apple unveils iTunes Radio at WWDC 2013. James Martin/CNET

When iTunes Radio was unveiled in June, nay-sayers quickly denigrated Apple's late-stage attempt to enter the already-crowded arena of music streaming.

But Apple gloated a little Monday when it announced iTunes Radio had notched more than 11 million unique listeners in the first five days since its September 18 launch on iOS 7 and the desktop iTunes software.

That figure is nearly four times the number of unique listeners that Rhapsody -- the subscription-based music service that pioneered streaming when launched in 2001 -- had in July, according to ComScore. Rhapsody's unique listeners numbered just 2.89 million in that month.

So much for first-mover advantage.

This pace of iTunes Radio listener growth -- 11 million in five days -- also puts it on track to surpass the current leader of Internet radio in less than 30 days.

Pandora, by far the biggest streaming radio service, had 64.9 million unique listeners in July, compared with 20.2 million for No. 2 Spotify, 14.4 million for iHeartRadio, and 5.4 million for Slacker.

If Apple can keep up its momentum, it will have 66 million unique listeners in 30 days post-launch.

Investors seemed to be crunching those numbers Monday. Pandora shares fell 10 percent to $24.26 apiece on Monday after Apple unveiled the iTunes Radio stat. Apple's shares rose 5 percent to $490.64 each.

A Pandora spokeswoman declined to comment on either the stock price or numbers released by Apple, other than to say that Pandora, as always, is keeping its eye on the long term. In the past, Pandora has said that iTunes Radio will be a positive development for Internet radio overall and that it will help bring more people over from broadcast radio rather than simply poaching listeners from other online services.

Slacker Radio Chief Executive Jim Cady echoed that sentiment in an interview after iTunes Radio launched last week. "Overall having [Apple] come out with a radio solution is good for the marketplace. They will educate the market," he said, adding that Apple releasing a radio product is "a validation."

"We can focus our efforts on building a better solution and not on market education," according to Cady.

Indeed, take a step back from Pandora's stock performance Monday and you see a much different picture. Even with the retreat Monday, Pandora's shares have still jumped 57 percent since the day Apple announced iTunes Radio. Last week, Pandora's stock reached its highest level since the company went public in 2011 -- and that was on the day after iTunes Radio launched.

Andrew Lipsman, an analyst at ComScore, noted that listening among the online radio services isn't a zero-sum game. "Look back to Facebook and MySpace as an example. There were lot of people using those things in parallel at the same time," he said. "Obviously a high percentage of people use Apple in a given month. You can basically convert a percentage of those of people who will at least kick the tiers in the beginning."

Sarah Tew/CNET

He added: "I would caution that it would not necessarily impact the other players" in streaming music."

Lipsman pointed to another social network as a cautionary tale before the thrill of iTunes Radio's rapid rise takes over: Google+.

"With Google+, it had tens of millions of users almost overnight," he said. Soon after Google+'s launch, ComScore's data showed Google+ growing by nearly 1 million users per day , reeling in 25 million people in a month. Facebook took three years to hit the 25 million milestone, and Twitter took a little more than 30 months.

Yet once the shine of novelty wore off, there was no doubting Facebook's primacy in time spent on social media .

The question in the online music realm is whether people have already identified the brand they use as their primary service.

"While more high quality digital radio players may eat into terrestrial radio listening, given the quality of the iTunes Radio experience, we have a hard time believing it will not eat into Pandora's market share of active monthly users and time spent listening," BTIG Research analyst Rich Greenfield wrote in a note last week.

The numbers here, too, seem to work in Apple's favor.

In the U.S., Pandora reaches only about 7 percent of the total radio-listening audience. That leaves a huge portion of the population up for grabs. Meanwhile, the strongest number on iTunes Radio's side is 500 million -- that's how many people use iTunes worldwide at Apple's last disclosure. Because of the complexities of music licensing across borders, no single player has emerged as a preferred Internet music brand internationally. Apple already has an installed base of millions using the software that delivers iTunes Radio to desktops, and Apple just made the iPhone more accessible to millions overseas .

Don't forget, Apple is the company that set the wheels of the current digital-music era in motion with the launch of the iTunes Store a decade ago .

"Apple is actually probably the best at playing that fast follower," Lipsman said. "And this isn't a totally new market for them."

 

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