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Pandora CFO Sees iTunes Radio as 'Credible Threat', Calls iTunes 'Detrimental' to Music Industry

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Pandora CFO Mike Herring this week made several comments about Apple's iTunes Radio service in an interview with CNET. The executive addressed on a number of topics, including how he sees competing music streaming services as viable threats, the issues surrounding artist pay by streaming services, and the current state of affairs for all streaming services for paying artists.

When asked what makes the company believe a competitor like Apple isn't a threat to Pandora, Herring acknowledged that Apple is indeed a threat but that it is just one of many high-profile services to enter the market.
It's not that it isn't a threat to Pandora. Don't get us wrong, we take them very seriously and do see them as a credible threat. Keep in mind there have been lots of credible threats over the years, from startups to Microsoft to Google, to Apple and Twitter this year. We absolutely see iTunes as a competitive option out there, but we think we are a great service that does this better than anybody else. The most recent entrants have all been large, well-funded companies that have agendas outside a really awesome music experience. They have other reasons, selling cell phones or downloads. We sell downloads, but the priority isn't to sell as many downloads as possible. It's emblematic of the difference.
Herring was also asked about how Pandora pays lower rates to music labels than Apple because of his company's choice to pay according to government guidelines instead of direct deals:
It's not about lowering rates -- that's about creating fair rates across lots of distribution channels. We've put offers on the table where we commit to paying no less than we pay now in absolute dollars, and with increases on an annual basis. That hasn't gone anywhere because of a lack of trust. It has created a situation where meaningful conversations for positive outcomes are going to be hard-fought wins. It's going to take a long time to get there.
The executive also expressed his feelings about how Apple's iTunes Store has been detrimental to the music industry by breaking down the traditional CD business.
One of the arguments against Pandora is that we're trying to pay artists less money. We'd like to see artists get paid more. We also understand the mistrust comes from a pretty tough decade-plus in the music industry. First you had the piracy issues, which are still rampant, mostly internationally but also domestically. And you had the download platforms, specifically iTunes, that disintermediated the entire CD business, which was detrimental. There's difficulty for people who have experienced these negative things to listen to reason.
Pandora CEO Joe Kennedy stated last month that the company was not worried about iTunes Radio, claiming that the company "did not see the picture changing". Apple launched its service last month, with a report last week stating that the service would be coming to the UK, Canada, Australia, New Zealand, and more countries by early 2014.

Apple's expansion could put its availability ahead of Pandora's in some markets, as Pandora currently operates only in the U.S., Australia, and New Zealand. Pandora, which removed its 40-hour free listening limit ahead of the iTunes Radio launch last month, has remained among the top-grossing apps [Direct Link] in the App Store, with its Pandora One premium service being among the top in-app purchases overall.

Article Link: Pandora CFO Sees iTunes Radio as 'Credible Threat', Calls iTunes 'Detrimental' to Music Industry
 

bp1000

macrumors 65816
Jul 7, 2011
1,373
64
Detrimental to his business model

Advantageous to me - helps me discover new music and buy straight from within the app - or add to wish list

So for me useful :)
 
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musika

macrumors 65816
Sep 2, 2010
1,285
458
New York
iTunes Radio is more enjoyable to use on iOS than Pandora. Period.

Also, the music is more diverse. My music was rejected from Pandora a couple of years back when I tried submitting it. They seem to have a thing against independent musicians. They said my music 'doesn't fit into their collection'. Alright.

Apple doesn't discriminate. With iTunes Radio, you're getting everybody. I think that leaving out indie artists is a pretty bad mistake and sucks for listeners looking for interesting new music.

Not to mention, Pandora's iOS app throws horribly designed UIWebView ads in your face every time you enter the app to change something on the now playing screen. Ads are fine and all, but at least do it in a way that is classy.

Even more so, Apple pays its artist more money. This is kind of big.

All in all, I prefer iTunes and find that it actually provides a better experience.
 
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gatearray

macrumors 65816
Apr 24, 2010
1,130
232
I'm sorry, I don't speak corporate jibberish, a little help here? :)
 

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kappaknight

macrumors 68000
Mar 5, 2009
1,583
82
Atlanta, GA
I tried Pandora and Spotify before... didn't really care for it. The songs they picked for my station were hit and miss. iTunes radio on the other hand has been pretty consistent in giving me songs I like. Within the last month alone I have already bought a bunch of songs I've never heard of before, which is more than the nothing I have spent on the other services.

A real credible threat indeed.
 
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gmcalpin

macrumors 6502
Oct 2, 2008
462
74
Somerville, MA
I'm sorry, I don't speak corporate jibberish, a little help here? :)

Disintermediation is the removal of intermediaries in a supply chain — a.k.a. cutting out the middle men. Also known as "vertical integration."

The thing is, I don't see how that applies here. iTunes/Apple operating a radio station is no different than Spotify doing it. It's the same number of middle men.

I think all of this dude's criticisms apply just as much to their own business. (And the number of musicians grumbling about Spotify's low payouts seems to support that.)

I mean, *I* love it. (I listen to Spotify on my desktop and iTunes Radio on my iPad. I think they're equally good.) But what's good for the consumer is not always good for the artist. So I try to buy the stuff I find myself listening to a lot, anyway. If only to be able to burn CDs and listen to them in my car.
 
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Michael Goff

Suspended
Jul 5, 2012
13,329
7,415
Let's hope iRadio gets a little better.

Pandora never gets my station wrong. iRadio puts disco in with Daft Punk. :|
 
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applesith

macrumors 68030
Jun 11, 2007
2,667
1,153
Manhattan
Detrimental because it killed the CD business? Yes and cars killed the horse and buggy, computers killed the typewriter. Blah blah blah.
 
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NewbieCanada

macrumors 68030
Oct 9, 2007
2,574
35
iTunes didn't kil the CD. iTunes rescued the paid-music industry that was destroyed by the end of people wanting CDs. CDs were dead anyway. All iTunes did was rescue the music companies by giving them a way to survive. Without iTunes there'd be no Pandora.
 
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sethlution

macrumors regular
Dec 13, 2011
202
48
I tried Pandora and Spotify before... didn't really care for it. The songs they picked for my station were hit and miss. iTunes radio on the other hand has been pretty consistent in giving me songs I like. Within the last month alone I have already bought a bunch of songs I've never heard of before, which is more than the nothing I have spent on the other services.

A real credible threat indeed.

I thought I was alone in thinking that iTunes was much better. I mean I constantly skip songs on all the other radio services that I tried, but iTune radio always produces a good playlist that I can listen to for hours. That, plus the fact that I can buy the song directly.
 
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designaholic

macrumors regular
Nov 10, 2007
235
21
Bristol, UK
If I was producing music I'd rather be on iTunes than the likes of Spotify et al... how much do artists make by agreeing to have their music on there? naff all.

Bottom line, iTunes is hardly detrimental where the artists are concerned and the iRadio service will just help artist sales further, presumably.
 
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samcraig

macrumors P6
Jun 22, 2009
16,637
41,615
USA
Detrimental because it killed the CD business? Yes and cars killed the horse and buggy, computers killed the typewriter. Blah blah blah.

There's a difference.

CDs are still "in play" - how many horse and buggies do you see typically?

Your post reads like a quote from an Apple keynote. In fact I am sure I've heard it exactly like that...
 
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alent1234

macrumors 603
Jun 19, 2009
5,688
170
pandora was cool years ago, but they refused to change

one time i asked them about local caching like slacker was doing and they said they had no plans. too many services out there now offer a lot more choice and pandora is way behind
 
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samcraig

macrumors P6
Jun 22, 2009
16,637
41,615
USA
iTunes didn't kil the CD. iTunes rescued the paid-music industry that was destroyed by the end of people wanting CDs. CDs were dead anyway. All iTunes did was rescue the music companies by giving them a way to survive. Without iTunes there'd be no Pandora.

rescue - but long term - it pretty much put them under Apple's thumb. Which is why the TV industry isn't so quick to make the same deal.
 
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thelatinist

macrumors 603
Aug 15, 2009
5,936
50
Connecticut, USA
iTunes radio is a serious threat to Pandora because it is a better user experience, has better music selection algorithms, is a better value for subscribers, and is built into iOS and iTunes.

I also fail to see how iTunes, Amazon, and the like are in any way detrimental to the music industry. Digital distribution was already here to stay. If anything they saved the music labels from the established piracy threat.
 
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roadbloc

macrumors G3
Aug 24, 2009
8,784
213
UK
As someone who buys only CDs, I don't see iTunes as a threat at all. CDs are still being made, there are still a few CD stores in town that are doing fine (although we got to say goodbye to the horribly overpriced HMV not long ago). Vinyl is still selling (just) so the total redundancy of CDs is still a while off yet.

As for Pandora, looks like iTunes has muscled into your market. Too bad but your days are probably limited unless you adapt and find a way to keep your customers. Moaning about it saying iTunes is the apocalypse of the music industry will achieve nothing.
 
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gatearray

macrumors 65816
Apr 24, 2010
1,130
232
Thanks for the help on the "disintermediated" thing guys, I was really only being half serious. ;)

The thing I guess I don't really get, is he saying the iTunes Store cutting out the record stores, i.e. the "CD business" was detrimental to the music industry?
 
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samcraig

macrumors P6
Jun 22, 2009
16,637
41,615
USA
As someone who buys only CDs, I don't see iTunes as a threat at all. CDs are still being made, there are still a few CD stores in town that are doing fine (although we got to say goodbye to the horribly overpriced HMV not long ago). Vinyl is still selling (just) so the total redundancy of CDs is still a while off yet.
.

Wait - I am so confused - a few posts up someone told me CDs were dead... ;)
 
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mabhatter

macrumors 6502a
Jan 3, 2009
880
237
Disintermediation is the removal of intermediaries in a supply chain — a.k.a. cutting out the middle men. Also known as "vertical integration."

The thing is, I don't see how that applies here. iTunes/Apple operating a radio station is no different than Spotify doing it. It's the same number of middle men.

I think all of this dude's criticisms apply just as much to their own business. (And the number of musicians grumbling about Spotify's low payouts seems to support that.)

I mean, *I* love it. (I listen to Spotify on my desktop and iTunes Radio on my iPad. I think they're equally good.) But what's good for the consumer is not always good for the artist. So I try to buy the stuff I find myself listening to a lot, anyway. If only to be able to burn CDs and listen to them in my car.

But Apple sells the devices too... So they are removing somebody getting fed in the moddle... So they are essentially underbidding to get the iTunes Radio because it doesn't have to be PROFITABLE for Apple. At this point Aple's not trying to put people out of business "on purpose" they're fighting with Microsoft and Googke and the rest of y'all are gettin squished underfoot, sorry.

Also, the modern "Album" music business didn't really start till the late 60's with the Beetles stuff. Before that radio singles were almost always 45's first. Albums were just collections of 45's thrown together. So really the digital singles market is just a return to older times of selling 2-3 songs at a time and not 8-12. You're an idiot business if you can't figure out how to get $3 for Gangam Style instead of just $1. It's not that hard to "bundle" so you don't have to sell songs one-at-a-time.
 
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roadbloc

macrumors G3
Aug 24, 2009
8,784
213
UK
Wait - I am so confused - a few posts up someone told me CDs were dead... ;)

They like to say that but that is like saying TV is dead because you can buy shows on iTunes or stream them on Netflix now. Just because it doesn't fit into their little ecosystem (which is perfectly fine, use whatever works for you), they assume it to be redundant technology that nobody uses.

It is true that physical formats are slowly on their way out, which is a massive shame in my opinion. Hopefully it'll take more than my lifetime to totally kill off CDs.
 
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thelatinist

macrumors 603
Aug 15, 2009
5,936
50
Connecticut, USA
I thought I was alone in thinking that iTunes was much better. I mean I constantly skip songs on all the other radio services that I tried, but iTune radio always produces a good playlist that I can listen to for hours. That, plus the fact that I can buy the song directly.

No, not at all alone. iTunes Radio has much better music selection algorithms. I find that Pandora stations need constant tuning or they devolve into something unrecognizable. Plus Pandora is constantly trying to foist music by unknown artists on me. I find I skip maybe one in twenty songs with iTunes Radio; with Pandora it's probably more than one in five.
 
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NewbieCanada

macrumors 68030
Oct 9, 2007
2,574
35
rescue - but long term - it pretty much put them under Apple's thumb. Which is why the TV industry isn't so quick to make the same deal.

Of course I'm not in the music industry, but I'd rather be under Apple's thumb than under six feet of dirt. ;)

Television & movies, which have never been entirely dependent on people going out and buying a physical product, are far better equipped to go their own way. Of course VHS and DVD did become a major component of their business model, but other players, like Netflix & VOD were poised to take part in the transition from physical media. Apple will never be able to achieve the same kind of dominance in video they have in audio, unless they introduce something that's as much of a game changer as the iPod was.
 
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Michael Goff

Suspended
Jul 5, 2012
13,329
7,415
No, not at all alone. iTunes Radio has much better music selection algorithms. I find that Pandora stations need constant tuning or they devolve into something unrecognizable. Plus Pandora is constantly trying to foist music by unknown artists on me. I find I skip maybe one in twenty songs with iTunes Radio; with Pandora it's probably more than one in five.

Lucky you, that's all I can say.
 
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