According to a recent Bloomberg article, Pandora has not suffered from Apple’s entry into the internet radio market. In fact, the current market leader’s market share has grown: hours of listening increased by 9 hours since September. Further, 92 percent of consumers who have used iTunes Radio still use Pandora. More evidence of Pandora’s strength is consumers tend to spend 75 percent less time on iTunes Radio than Pandora. Pandora’s recent growth is consistent with the company’s long-term trends, as the number of listeners is up 18 percent from one year ago.
Apple’s decision to enter the streaming music market is interesting when one considers that leading firms like Pandora and Spotify have not had financial success. Pandora operated on a net loss of $16.1 million in 2012 and even larger losses in 2009 and 2010. Spotify has never made a profit in its history and its losses have increased annually. It should be noted that the industry is relatively young and that both firms have been growing. Pandora raised $400 million in September for international expansion and currently operates in the US, Australia, and New Zealand. With continual and consistent growth, these companies may see profits soon.
These companies’ losses may help illuminate the advantage Apple may have over its competitors. With Apple’s deep pockets, operating losses may not be as detrimental to company longevity in comparison with Pandora and Spotify. Further, iTunes Radio is still very young. As more consumers gain access to iTunes Radio through other Apple products like the iPad and iPhone, usage should increase. Exacerbating the industry’s tenuous financial standing is the fact that all firms are competing with piracy. Full control of the market by these companies is highly unlikely, which makes any decrease in market share a critical issue.