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A New Music Service for Apple?



September 14, 2012 – Comments (0) | RELATED TICKERS: AAPL

Board: Apple

Author: Goofyhoofy

According to several reports (including this one in the NYTimes), Apple is planning, or at the very least investigating the idea of a music service a la Pandora, Spotify,

They're already huge in the music business, of course, with iPods and iPads and iPhones full of music in people's pockets, so maybe this is a natural extension. They also already have credit card numbers for monthly billing, for impulse purchases, and an incipient ad service to support a free or freemium approach to the business.

As one person in the article says, "Why do we need another service?" since there is already iHeartRadio, and others, and that is all true. We don't "need" another service, but I think I see a reason FOR another service.

One of the problems with Internet radio is that providers are required to pay royalties to artists and songwriters every time a song is played. Entirely fair (although I am told that the rate is "too high" to make it very profitable. That may be true, I wouldn't know, although I do know nobody ever complained that their rate was "too low.") Well, one easy way to cut costs would be if you didn't have to pay that rate, or could pay half, or a quarter of what others might have to.

And how would that be accomplished? Well, you don't have to pay a royalty if you're playing your own music on your own device. Could Apple cobble together an app which

1. Allows streams based on your already existing iTunes library, the way Amazon predicts what books you are likely to buy based on your purchase history?

2. Integrates familiar songs from your own library (which they don't have to pay for) with other, newer songs (which they do.) If I'm not being clear, when Pandora sends you a song you already own, they're paying for it all over again. Apple might do this without cost, giving them a pretty fair competitive advantage.

3. Enable the easy acquisition of songs heard in their streams with some kind of "one click purchase" functionality, which would be a godsend to record companies by eliminating a significant amount of friction in the sales process, while simultaneously putting even more sales through iTunes.

Now perhaps this is too clever by half, and Apple would have to pay for the right to trigger sings from your own library, (although I don't see why), I can still see efficiencies and potential for such a business. And if there are such efficiencies, (to turn the quote on its head "What is the purpose of the other music services, except to do something not quite as well, using more bandwidth and paying more royalties, and therefore be less profitable?"

People have been after Apple for years to start a companion "subscription service" to iTunes. This could be it.

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