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With the launch of iOS 7 today, Apple is entering the streaming music market.
The digital music world is a crowded one, with everyone from Pandora to Spotify and Slacker to Google, all working to help listeners find their new favorite song.
According to a recent study underwritten by radio powerhouse Clear Channel, 80 percent of Americans are still get their music from FM radio, but streaming music is the fastest growing market in the record industry.
With Apple’s entry into the market, more people will have access to streaming music in the palm of their hands.
CNET executive editor Paul Sloan talks with Here & Now about the release of iTunes radio, what it is exactly and how it will change how people listen to music.
MEGHNA CHAKRABARTI, HOST:
It's HERE AND NOW.
Well, Apple is releasing its new operating system for iPhones, iPads and iPods today. iOS 7 includes over 200 new features, including this one.
EDDY CUE: Now, the music app is the best way to listen to your music. But today we're introducing an amazing way to discover new music, and we call it iTunes Radio.
CHAKRABARTI: Well, that was Eddy Cue, senior vice president of Apple Internet services unveiling iTunes Radio back in June. The free Internet radio service features over 200 stations and a large catalogue of music. But the big question is: Is it a Pandora killer? And what effect will it have on actual FM radio? Joining us now for more is Paul Sloan, executive editor at CNET. He's in San Francisco. And Paul, first of all, walk us through how this new iTunes Radio is going to work.
PAUL SLOAN: Sure. It's super simple. If you're on a phone, an Apple phone, of course, you just tap on your music app, which is right - comes installed right on the phone, and you'll have all the music from your iTunes account. But then there's also a button for radio. And then from there you select stations that are already created based on what Apple thinks you will like. Or you can just dial up stations as you would any sort of radio model. You can pick genres, or you can go select - add an artist and it'll create a station around that, much like the way it works on Pandora.
CHAKRABARTI: Yeah. I was just going to say, it sounds very familiar for people who already use Pandora. That's 200 million registered users. And I mean Pandora isn't the only business in this market. Nokia launched a streaming radio service in 2011. There's also Spotify, of course. So Apple isn't, you know, first to market on this. Does it matter?
CUE: It doesn't matter. It doesn't matter at all, really. I mean they've done lots of things where they're not first to market. You know, could it hurt Pandora? Sure. It could hurt. If you're Pandora, you're thinking it's just a larger pie, and there's enough room for everyone. There's a lot of people in the world who like to listen to music, especially free music.
SLOAN: But surely the folks at Pandora are nervous, you know, with such a quality product that comes build right in on your phone. And you know, how can they not be nervous about it? It's very competitive. Spotify, for all the hype it gets, still isn't that big. And it's a different service, mind you. It's an on-demand service. There's a bunch of those where you can call up an album and listen very specifically to what you want.
Apple Radio is not that. You can't say let me listen to fill-in-the-blank album and then it'll pick your song. It's a radio. You can say let me listen to, you know, Prince radio or pick, you know, Jason Mraz radio or let me listen to hip-hop or blues music and it'll create a radio station based on - around what you - what it thinks you like and what it programs by all these programmers and sort of DJs that they have working at Apple now.
CHAKRABARTI: Well, Paul, tell me more about that because I know one of the complaints for Pandora has been that, for example, the song selection isn't broad enough, the algorithm isn't sophisticated enough for people who use it a lot. What is Apple doing differently regarding the actual songs and the user experience?
SLOAN: Yeah. I mean I don't - I can't tell you what's in the software. But if you think about it, to start with, Apple has incredible data on most of its customers. If you've been an iTunes customer, it knows what you've bought. And if you've been willing to pay for a few tracks off one album, it'll know you like that singer. And then, for instance - and it'll also know, maybe we'll give you the other singles off that album or the other tracks. So it'll look at all your behavior on iTunes across the years and then help create a station that's personalized to you with that.
But in addition to that, the main thing it'll do that Pandora really doesn't do is it works very closely with the labels, and it has been hiring people that are really DJs and programmers and station programmers, people that they - that have expertise that is human. It's a human touch. And this is the whole big debate going on in all these music services, is how much to rely on software, how much to rely on people. And the answer, you know, ultimately is going to be a bit of both.
CHAKRABARTI: Yeah. So you've reported that the music industry - digital music side is really rooting for Apple's success here.
SLOAN: The music - the labels and the music...
CHAKRABARTI: Yeah, exactly.
SLOAN: Yeah, for a number of reasons. They hate Pandora...
SLOAN: ...not to put too fine a point on it, for one reason, which is they - is the rates. Pandora pays rates. Every time you play a song on Pandora, they have to pay the rights holders. But that rate is set by the government. It's through the Digital Millennium Copyright Act, and it's a much lower rate than the labels would like. Apple went - and it comes with a bunch of other limitations, by the way. Apple instead went directly to the big labels and the smaller labels and all and did direct deals so that it can - the labels will make more money from it.
There's an ad sharing component. There's all these kinds of ways they can make money from it. Plus, this allows Apple more easily to go global. Wherever they have iTunes, they can potentially have Apple - iTunes Radio, although they're just launching in the U.S. today.
CHAKRABARTI: Well, Paul, so how is Apple going to make money on its side? I mean right now are they moving toward - are they going to eventually move towards advertising as a major stream of revenue? Or is that already there in the new iTunes Radio?
SLOAN: Yeah. There is advertising in it. I don't remember exactly how many ads you hear per hour. It's not a ton. So there's an ad share on that. But you know, it's a hard business, digital music. Seventy percent - so 70 cents of every dollar you bring in basically goes to the rights holders. But Apple doesn't care, right? I mean Apple isn't in this to make money immediately off the music.
They're in it to make their devices better and make more people want their phones and just make their - keep people married and attached to their - to the hardware, which is, you know, they have formidable competition from Samsung and Android and all the other devices out there. So that's really what it's about. Ultimately does it become a healthy business for them? Sure.
I mean iTunes is a huge business for them. And in the beginning, iTunes itself was really just designed to sell iPods. But then over time it became lucrative for them. It's very hard for these companies like Spotify to make a go at it as a pure play, but Apple doesn't have to do that. It's got all these other businesses around it.
CHAKRABARTI: And, Paul, final question. I see you've quoted someone from the digital music industry saying we're hoping Apple shakes up the entire radio market. Now, Apple has changed the way we look at what a phone is or what a smartphone is. Are they going to do the same thing when it comes to radio, which, you know, would affect a lot more people outside, you know, not just in music but outside of it, present company, aka NPR, included?
SLOAN: No. I don't think NPR has to worry. And they're not talking about - when that person is talking about shaking up the radio industry, he's really talking about having a whole - people that are used to listening to music on FM will now listen to it streaming. There too it's - the labels, you know, don't make money off of FM radio, very little. You know, in the old days it was payola, remember? Then you had to - they just used it for promotional purposes.
SLOAN: Now that's changed. And if people go through streaming and streaming services, the labels that Apple wants, then everyone makes more money, including potentially the artist.
CHAKRABARTI: Paul Sloan is executive editor at CNET. Paul, thanks so much.
SLOAN: Thanks for having me.
CHAKRABARTI: We'll be back in a minute, HERE AND NOW. Transcript provided by NPR, Copyright NPR.