iTunes Radio, Apple's New Streaming Music Service, Could Help To Boost iTunes Sales, Analysts Say

If iTunes Radio were the work of virtually any other company, analysts might well be pronouncing its last rites on arrival. Another streaming music service seems certain to confront a field crowded with competitors that have captured the affection of hundreds of millions of consumers, from Pandora and Spotify to Rdio to TuneIn.

But Apple is not any other company. Its iTunes store is already the largest music retailer in the world. Late to the market or not, analysts think that iTunes Radio, released Monday, could give a much needed boost to iTunes -- which has seen little growth in its customer base over the last three years -- enabling Apple to sell even more music.

According to the NPD Group, a market research firm, 44 million people in the U.S. purchased at least one album or song from iTunes last year, and that number has for the most part remained stagnant over the last three years. (Apple's revenue from music downloads has increased during that time because spending per buyer has increased, according to NPD.)

In a world where brick and mortar CD stores, full of passionate and knowledgeable salespeople, prominent physical displays and carefully curated musical selections, are all but a relic of the past, a streaming service from Apple could be integral in helping consumers find and purchase new music from iTunes.

"A lot of folks who stream say [streaming] helps me to discover and rediscover music," said Russ Crupnick, a senior vice president at the NPD Group. "It's not necessarily that just because I spend an hour streaming I'm going to download fewer song files."

"You have people using things like Pandora and Spotify and saying in addition to that I want to buy music," Crupnick added.

iTunes Radio is a free, ad-supported streaming music service that works on Apple's mobile devices as well as on desktops and Apple TV. (Users who subscribe to iTunes Match, a service that allows them to store music in the iCloud, won't have to put up with ads.) iTunes Radio will build stations and playlists based on users' existing music libraries and will allow them to choose stations they like based on songs or albums.

And if users like a song they hear, they can add it to a wish list or choose to buy it from the iTunes store.

TuneIn, an online radio service with more than 40 million active users, has found success in a similar purchasing function. If users enjoy a song they hear streaming on TuneIn, they can buy it on iTunes, Google Play or in the Amazon MP3 shop. TuneIn says that more than 1 million people each month purchase songs this way.

The streaming music industry is large and continuing to grow. According to figures from eMarketer, more than 96 million people in the U.S. stream music each week on digital devices, up from 85.4 million people in 2012.

Crupnick said that iTunes traditionally hasn't been as good as the radio or retail at helping people discover new music, and that a streaming service could help improve Apple's music discovery element.

"Folks were always stumbling into music because of the places they shopped," he said. "Most folks aren't going to iTunes every week the same way you used to go to Sam Goody."

Anthony Mullen, a senior analyst at Forrester Research, said that even though the new service was just released, Apple already has a head start with its iTunes store.

"A really tight integration between streaming and purchased music is something the iRadio competitors can't match and that surely will be an advantage for Apple," Mullen wrote in an email before the product's official name was announced.

Like Google, which last month launched a subscription-based streaming music service, Apple can afford not to hit a home run right away with iTunes Radio.

"The reason that a move into streaming audio is important isn't for the immediate short term revenue to be gained for Apple," Mullen wrote, "but to shore up the minutes of engagement the brand has with consumers as well as extend reach and provide inroads to the track purchasing in iTunes."



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