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June 10, 2013 | CEO's Corner

Apple Gets Into "iTunes Radio" Business: What It Says About The Market For Online Music

Apple’s announcement of the launch of its iTunes Radio service is understandably generating a lot of attention on the expanding number of streaming services and what it might mean and say about the online music marketplace. Here are some initial thoughts from my perspective.

It’s not really a surprise that Apple would want to expand its music footprint to include a streaming service. Music, more than ever, is driving online commerce and conversation. Music and musicians dominate Twitter and Facebook conversations and leading technology companies are rushing to introduce and expand a broad array of streaming business models. Everything from on-demand audio and video services like Spotify, Vevo and Rhapsody, to digital radio outlets like Pandora, Sirius XM and iHeartRadio. It’s clear that there’s plenty of consumer demand for all sorts of platforms – the “lean forward” model where the fan picks exactly what he or she wants to the “lean back” model where a playlist or particular genre of music is served up to the user. And permutations or hybrids of each, such as what Apple is now offering. What connects it all is instant, easy, seamless access, often to smartphones and other connected devices.

The growing popularity of these services is borne out by the user numbers and the revenue figures:

According to an NPD report issued earlier this year, “subscription-based and free Internet radio services accounted for nearly one quarter (23 percent) of the average weekly music listening time among consumers between the ages of 13 and 35, an increase from a share of 17 percent the previous year.” Listenership is booming.

Music streaming and “access” services have quickly become significant revenue contributors for the music industry and its partners. Collectively those models have grown from just 3% of total recorded music industry revenues in 2007 to 15% in 2012, totaling more than $1 billion last year.

Collectively, this paints a picture of a booming market that’s already enormously successful and with even more potential. It’s no wonder that leading technology companies want to be major players in this space.

One addendum: two other recent initiatives developed by the RIAA speak to the growth of this marketplace. With NARM, we recently launched, a go-to guide for the leading digital music services. The marketplace had become so robust, so extensive, that a one-stop shopping guide was necessary. We also recently announced that we would be counting on-demand streams as part of our historic Gold & Platinum Program. The industry’s premier program for recognizing artistic achievement in the marketplace should keep pace with evolving consumer habits.

Cary Sherman