updated 11:50 pm EDT, Mon March 10, 2014
Close to capturing second, but still far behind reigning champ Pandora
Barely six months after it debuted, Apple's iTunes Radio has already eclipsed Spotify and Google Play All Access (and others) to become the third most popular music streaming service in the US, according to a new report from Statista. While long-time veteran Internet radio station Pandora continues to maintain a clear lead over all rivals, it has taken 14 years for the latter service to reach its current level of 70 million active listeners (as of last April) and it continues to struggle with profits.
According to the Statista chart based on data from Edison's annual radio report, Pandora has a 31 percent share of the music streaming market. This is based on active listeners (tuning in more than once a month) rather than paid listeners, which represents a far smaller group. It is difficult to directly compare Pandora to iTunes because of the different business models: iTunes Radio offers unlimited free listening on all devices, but users can avoid ads by signing up for iTunes Match. Apple has not released any recent reports on the number of active listeners since it announced it had acquired 11 million shortly after the service went live.
Pandora's percentage would suggest that iTunes Radio and iHeart Radio (third and second place, respectively) have around 20-21 million listeners. While users can hop between services freely (and at least one report has suggested that 92 percent of iTunes Radio listeners also find time for Pandora), that figure would suggest that iTunes Radio is growing at the fastest rate of the top three services, and is likely to overtake iHeartRadio in the next quarter or two -- particularly if iTunes Radio expands to more countries (it added Australia last month, and plans to add Canada, the UK and New Zealand in the foreseeable future).
This spells trouble for Spotify, which is already an international service and well-regarded for its $10 per month "millions of songs on demand" streaming option. Nevertheless, it was rated at six percent share, followed by Google Play All Access at three percent. Rhapsody, Slacker and TuneIn Radio all took only two percent share.
Pandora's years-in-the-making success is unlikely to change anytime soon, and indeed it recently reported modest growth in active listeners and the number of listener hours (though it has more recently focused on raising income from advertising and mobile ads rather than pursuing paid subscribers as a priority). However, its margins are very thin: the service has extraordinarily high licensing costs (which are rising) and was recently handed a defeat by the FCC on its plan to lower licensing costs by taking over a terrestrial radio station, thus qualifying for lower FM radio royalty rates.
While Pandora made $410 million in revenue in 2012, it cleared only $16 million in profit. In 2013, it earned $638 million in revenue but lost $40.7 million for the year, and has warned investors it will likely lose money for the next year or two. There is also evidence that listeners are growing tired of Pandora's limited pool of about 800,000 songs. Its closest rival, iHeartRadio, is a service owned by terrestrial radio company Clear Channel and has both lower royalty rates and some 800 commercial radio stations featured in the app. Apple, of course, can invest in iTunes Radio as it wishes, and has access to the largest pool of available music anywhere, with over 15 million songs available.