Audiophiles, this one's for you. Pandora better take notice -- Apple is getting into the streaming music business and has a monetization strategy to boot. Today at the Worldwide Developer's Conference (WWDC), Apple is expected to announce its new music service that will offer highly-targeted ads in the form of interstitial audio clips to drive additional downloads. While the streaming music platform has yet to be named officially, many are already calling it iRadio, it is making quite a splash in the media the week before it is expected to be unveiled to the public.
According to AllThingsD, Sony Music has officially signed on for Apple's "iRadio" service. This means that each of the three major music labels are now on board for the Pandora-like music discovery platform.
The ad industry has been waiting for a service like this that natively integrates audio advertisements seamlessly into the listening experience. These interstitial audio ads will play between songs, allowing Apple to offer the service for free to people around the globe. These types of ads are already offered on competing music streaming sites like Pandora and Spotify, but since it is Apple, marketers are excited about the click-to-download opportunities that will be more closely integrated into the flow of ad delivery towards conversion.
Apple's new music service and partnership with Warner Music Group, will allow people to purchase the song they are listening to through iTunes and when coupled with iTunes Match, they will be able to sync to the cloud and own these songs forever. However, it will not let users search for and play songs on demand like Spotify.
Apple's primary competitor will be Pandora, who better start amping up its game. On Monday June 3, Pandora's shares fell more than 10 percent to close at $15.22 after news surfaced that Apple had inked the licensing deal with Warner Music Group, speculated to be the first step towards the launch of Apple's streaming service.
"Very few details about Apple's plans are known," said Stifel Nicolaus analyst Jordan Rohan, in a research note on Friday. "If iRadio may cannibalize users from Pandora, the labels will make sure that Apple pays more total dollars per song or label than Pandora would have paid for that similar audience."
Currently, Pandora can only target users based upon limited, self-provided demographic information like gender, area code and listening behaviors. Apple has access to the targeting capabilities of its iAd platform and will incorporate this in its ad delivery strategy. Also, using iRadio on an iPhone will give iAd the ability to more precisely target ads to users based on location.
Apple is also negotiating with advertising companies such as Omnicom Group (OMC) for securing sponsors for iRadio. Additionally, Apple has already lowered fees and cut prices to attract media agencies and is now selling alcohol-based advertisement within its apps. These moves reflect a major shift in Apple's strategy to woo advertisers, which will boost its top-line going forward.