Why Apple Is Making iRadio: To Help Discover Music In iTunes

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Have you ever wondered: if Apple makes billions of dollars off of music downloads, why are they supposedly planning on launching their own music streaming service, iRadio, later this year? Wouldn’t such a service actually lead to less downloads?

It’s a good question, and there’s a good answer.

According to new data released today by the NPD Group, Apple is still the king of the hill when it comes to music downloads, commanding an enormous 63 percent of all digital tracks sold in Q4 2012, with Amazon a distant second at 22 percent.

Here’s the rub, though. Services like Spotify and Rdio — where you pay a monthly fee for all-you-can-stream music from a library of millions of albums — are Apple’s major competition in this space these days. The question has now become whether or not you buy or rent your music, with only 38% of U.S. consumers thinking its important to own their own music.

But here’s the rub. That percentage is even higher for users of Pandora, a service which Apple is rumored to base their own iRadio service upon. Why? Because Pandora — which gives you streaming radio stations based upon your tastes, but does not allow for a la carte streaming of anything in their library at any time — actually encourages music downloads through iTunes.

Erica Ogg over at GigaOM has a very smart take on what this means:

That’s why it’s smart for Apple to invest in iRadio. The goal is not to kill Pandora, but to actually bring that type of radio service to more users, and keep them from switching to a full-blown access model. In other words: It’s not about Pandora, and all about Spotify.

Launching a decent iRadio service built into millions upon millions of devices, in other words, can only booster Apple’s stranglehold upon the music downloads business, even as the likes of Spotify and Rdio try to convince consumers to rent, not buy, their music for a monthly fee. iRadio is smart business sense.

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About the author

John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.

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