Does Apple Have a New Musical Money Scheme?
It’s been widely suggested that Apple will be coming out with as music-streaming service that will be similar to other online radio services like Pandora (NYSE:P). It had been rumored that Google (NASDAQ:GOOG) would also launch an Internet radio, and Google did just that. The iPhone maker is already quite established in the music realm with iTunes, so it wouldn’t be too much of a stretch or a surprise to see the company come into the music-streaming market.
People familiar with Apple’s plans said that the company plans to unveil the service at its large developers conference next week. When Google unveiled its new music service — Google Music All Access — it launched the service the same day, but Apple is not likely to do that, according to the people. Rather, the service will come out when iOS 7 is launched later this year, one of the people said.
Apple was said to have been in talks with major media producers and reached agreements with Universal Music Group and Warner Music Group. While talks were reportedly reaching their conclusion Monday, Pandora’s shares slipped 11 percent, followed by a slip of more than 4 percent Tuesday. If simple discussion of Apple’s service could damage Pandora that much, the actual launch could hurt the streaming competitors even more.
Despite the possibility of Apple being a major contender in the music-streaming business, that doesn’t appear to be what the company will focus on. Instead, coming up with better advertising opportunities may be the primary agenda behind Apple’s foray into this service.
According to the people familiar with the plan, Apple’s iAd business will be putting a lot of work into the music platform. The iAd platform has had some trouble in the past, as advertisers and companies were not always comfortable not having full control over which third-party applications their advertisements would run it. Putting advertisements in an Apple-run applications could appease advertisers, and could also prove good business for both parties.
The people for whom this news may be most significant are app developers. With $4.11 billion in mobile ad business last year, and $7.29 billion expected this year, there is a lot of money swirling around that Apple could get its hands on, and additional avenues to get that cash should only help. Research EMarketer Inc estimated that Apple’s iAd platform would pull in $212.9 million this year.
One of the key things to note is that Apple’s iAd has historically not been about the company’s own profit. Steve Jobs had planned for iAd to draw in revenue that would be shared mostly with developers so that they would have incentive to continue working hard to make apps on Apple’s platforms. Tim Cook, the company’s current chief executive officer, echoed this ideal in an interview at the D: All Things Digital conference, saying that Apple’s core business didn’t include advertising and the money made from iAd was intended for developers.
So, while the new music service could be big business for Apple, it may be most significant for developers. Of course, the benefit of having loyal developers is that Apple may continue to prosper from the popular apps that have made its mobile devices recognized around the world.
Follow Mark on Twitter (@WallStMarkSheet)
Don’t Miss: Is the iPhone Turning Gold?