Apple's (NASDAQ:AAPL) possible entry into an online music streaming service has been an hanging over Pandora (NYSE:P) over the past few weeks. The rumored "iRadio" service was unveiled yesterday under the iTunes Radio moniker. Apple is very much replicating Pandora's value proposition of music discovery based on learning user preferences, but the service doesn't really put any innovative twists to online radio.
Google (NASDAQ:GOOGL) launched its own music service, All Access, last month, after quickly inking the requisite licensing deals with the record labels. All Access is more similar to Spotify as an on-demand service. Apple had reportedly been working overtime to ink its own deals, in part because its service was supposed to be an innovative "hybrid" of some sort that entailed more complex terms. Apple scored the final deal just days before WWDC.
iTunes Radio doesn't seem like a hybrid service, though, and is quite similar to Pandora, which isn't necessarily a bad thing considering Pandora's popularity. Pandora recently launched a "Premieres" station that offered previews to albums before they go on sale, which was a potential differentiator. However, Apple is also offering exclusive pre-releases.
The free ad-supported service will rival Pandora's directly, but Apple is undercutting on price. The ad-free Pandora One costs $36 per year (or $48 per year if you pay monthly), while Apple is offering iTunes Radio ad-free for iTunes Match subscribers, which costs just $25 per year. For $25, Apple is effectively offering both an on-demand and radio discovery streaming service, albeit the on-demand part is limited to a user's existing library of purchased tunes.
In comparison, Google's All Access is priced at $8 per month, or $96 per year. That's a promotional rate that ends this month, after which the price goes to $10 per month, or $120 per year. All Access has more features, though, and includes streaming access to a vast library in addition to a radio service.
iTunes Radio isn't a killer service by any means, but does keep Apple abreast of the competition. Apple still philosophically believes that users want to own their music, which is why it seamlessly sends links to the iTunes Store. Consumers are shifting to streaming access models, and iTunes Radio simply delivers a service that's becoming table stakes. No more, no less.
Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.