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Apple Set to Turn Up the Heat on Pandora

The Wall Street Journal reported this evening that Apple is working to create a music streaming service to rival Pandora. Rumors of a service of this type have been swirling for some time, but the fact that the Wall Street Journal is reporting it certainly lends more credibility to the claim this time around.

Despite Steve Jobs’ opinion from several years back that “People want to own their music” rather than just borrowing it, the tide is certainly turning. With the recent proliferation of services such as Spotify and Pandora which boast 16 million and 54.9 million active users respectively, more people than ever are streaming their music rather than purchasing it. This data is backed up by a Nielsen Co. survey that showed that more adults claim to use Pandora than Apple’s iTunes. The fact that Pandora is expected to earn $226.4 million in mobile ad revenue for 2012 versus only $75.1 million for Apple’s iAd is certainly on the radar in Cupertino. While the royalty rates for streaming music online are significantly higher than the rates paid by terrestrial radio stations, Pandora has proven that there is money to be made in this game.

While many would say that what users really want is an Apple service that rivals Spotify’s a la carte style, that business model has yet to prove its self to be a substantial money-maker. It was recently reported that Pandora is working behind the scenes to try to permanently alter the royalty rates that it must pay to bring it closer to the traditional radio rate. If that happens, that will make the ad-supported streaming radio game even more appealing.

The new Apple service is reportedly using iAd to intermittently supply ads in between songs. There are plans to offer the service on Apple’s vast array of devices, with the possibility of running on Windows devices. As of yet, there are no plans to offer service to devices running Google’s Android operating system.