Apple unveils iTunes Radio at WWDC 2013.
(Credit: James Martin/CNET)Apple spent more than a year to bring together the major music labels and realize its vision of an online radio service, and at its unveiling, the world was quick to denigrate the late-stage attempt to enter a space -- online streaming music -- that is growing quickly but already crowded with competitors.
But it only took five days for iTunes Radio's number of listeners to eclipse that of the pioneer in streaming music -- many times over.
Monday, Apple said that iTunes Radio notched more than 11 million unique listeners since its launch on iOS 7 and desktop iTunes software five days earlier.
That's nearly four times the number of unique visitors that the pioneer in online music, subscription-based service Rhapsody launched in 2001, had in the month of July, according to ComScore. Rhapsody's uniques numbered just 2.89 million.
So much for first mover advantage.
This pace of iTunes Radio listener growth -- 11 million in five days -- puts it on track to surpass the current leader of Internet radio in less than 30 days. Pandora, by far the biggest online streaming radio service, had about 64.9 million unique visitors in July, compared with 20.2 million for No. 2 Spotify, 14.4 million for iHeartRadio and 5.4 million for Slacker.
If Apple can keep up its momentum, it would have 66 million listeners in 30 days after launching.
Investors seemed to be crunching those numbers Monday. Pandora shares fell 10 percent to $24.26 apiece Monday after Apple unveiled the iTunes Radio stat. Apple's shares rose 5 percent to $490.64 each.
A Pandora spokeswoman declined to comment on either the stock price or numbers released by Apple, other than to say that Pandora, as always, is keeping its eye on the long term. In the past, Pandora has said iTunes Radio will be a positive development for Internet radio overall, helping bring more people over from broadcast radio more so than poaching listeners from other online services.
Slacker Radio Chief Executive Jim Cady echoed that sentiment in an interview after iTunes Radio launched last week. "Overall having [Apple] come out with a radio solution is good for the marketplace, they will educate the market," he said, adding that Apple releasing a radio product is "a validation."
"We can focus our efforts on building a better solution and not on market eduction," according to Cady.
Indeed, take a step back from Pandora's stock performance Monday and you see a much different picture. Even with the retreat Monday, shares have still jumped 57 percent since the day Apple announced iTunes Radio. Last week, they reached their highest level yet went public in 2011, and that was on the day after iTunes Radio launched.
Andrew Lipsman, an analyst at ComScore, noted that listening among the online radio services isn't a zero-sum game. "Look back to Facebook and MySpace as an example, there were lot of people using those things in parallel at the same time," he said. "Obviously a high percentage of people use Apple in a given month. You can basically convert a percentage of those of people who will at least kick the tiers in the beginning."
"I would caution that it would not necessarily impact the other players" in streaming music, he said.
And Lipsman pointed to another social network as a cautionary tale before the thrill of iTunes Radio's rapid rise takes over: Google+.
"With Google+, it had tens of millions of users almost overnight," he said. ComScore's data soon after Google+ launched showed it growing around 1 million users per day, reeling in 25 million people in a month. Facebook took three years to to hit the 25 million milestone, and Twitter took a little more than 30 months.
Yet once the shine of novelty wore off, there was no doubting Facebook's primacy in time spent on social media.
The question in the online music realm is whether people have already identified the brand they use as their primary service.
"While more high quality digital radio players may eat into terrestrial radio listening, given the quality of the iTunes Radio experience, we have a hard time believing it will not eat into Pandora's market share of active monthly users and time spent listening," BTIG Research analyst Rich Greenfield wrote in a note last week.
The numbers, here too, seem to work in Apple's favor.
In the U.S., Pandora reaches only about 7 percent of the total radio-listening audience. That leaves a huge portion of the population up for grabs. And the strongest number on iTunes Radio's side is 500 million. That's how many people use iTunes worldwide at Apple's last disclosure. Because of the complexities of music licensing across borders, no one player has emerged as a preferred Internet music brand internationally. Apple already has an installed base of millions using the software that delivers iTunes Radio to desktops, and it just made the iPhone more accessible to millions overseas.
And don't forget, Apple is the company that set the wheels of the current digital-music era in motion with the launch of the iTunes Store a decade ago.
"Apple is actually probably the best at playing that fast follower," said ComScore's Lipsman. "And this isn't a totally new market for them."
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