In what may very well be the worst news for Pandora in recent history, Apple (News - Alert) has reportedly stepped up talks with music labels in a bid to get their own streaming-radio site in play by the early going of next year.
Supported by advertisers, with a plan in the works for revenue sharing, the service could kick off before spring arrives if discussions go smoothly.
Apple, along with music companies, have noticed that a steady decline in the amount of music downloads being sold is dominating the market. As such, both Apple and the labels are out to find a better way to get users back in the fold and contributing to the bottom line, and have thus started to consider the advertiser-supported streaming-radio model as a way to find new music they're interested in, and from there, buy it.
Pandora (News - Alert) is pretty much the leader in this field right now, but is focused on a licensing system that limits how users can interact with their music, like limiting the number of times users can skip a track or play the same artist in an hour. Apple, meanwhile, wants to increase the speed at which users get access to new music, cutting into physical radio's markets as well.
Word about Apple's plans to get in on Internet radio wasn't well received by investors, who sent Pandora's stock on a 12-percent decline after the first reports emerged about Apple's move.
Further word suggests Apple's streaming radio service will be primarily geared toward users of its iOS hardware lineup – specifically, the iPod Touch, the iPhone (News - Alert) and the iPad – and will shy away from sending music through Web browsers.
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That may be an option in the future, but the focus is said to be on the more mobile hardware.
The sticking point for Apple right now seems to be an issue on how the ad sales are divvied up among the stakeholders, with record companies out for an upfront fee and a percentage of ad sales, as well as the opportunity to insert some advertising of their own to promote other artists who may not be in users' streams.
Apple, meanwhile, wants to use the service as a way to both grow interest in the iAd mobile advertising system as well as get interest back in iTunes.
If Apple does launch a streaming radio service, Pandora may find itself hard-pressed to keep up. Apple already has a substantial customer base to work with, and working with mobile devices gives them access to cars as well. Apple staying somewhat out of Web browsers does give Pandora some breathing room, but is it going to be enough room to keep them viable as a service?
Apple loosening the restrictions that Pandora operates under might likewise prove impetus to move away from Pandora, meaning there are several different sides from which Pandora is being squeezed.
Only time will tell just how the whole affair comes out, but it's clear that Apple entering the market is a risk for just about any firm, and Pandora will likely prove no exception.
Edited by Braden Becker