Pandora CFO Mike Herring this week made several comments about Apple’s iTunes Radio service in an interview with CNET. The executive addressed on a number of topics, including how he sees competing music streaming services as viable threats, the issues surrounding artist pay by streaming services, and the current state of affairs for all streaming services for paying artists.
When asked what makes the company believe a competitor like Apple isn’t a threat to Pandora, Herring acknowledged that Apple is indeed a threat but that it is just one of many high-profile services to enter the market.
It’s not that it isn’t a threat to Pandora. Don’t get us wrong, we take them very seriously and do see them as a credible threat. Keep in mind there have been lots of credible threats over the years, from startups to Microsoft to Google, to Apple and Twitter this year. We absolutely see iTunes as a competitive option out there, but we think we are a great service that does this better than anybody else. The most recent entrants have all been large, well-funded companies that have agendas outside a really awesome music experience. They have other reasons, selling cell phones or downloads. We sell downloads, but the priority isn’t to sell as many downloads as possible. It’s emblematic of the difference.
Herring was also asked about how Pandora pays lower rates to music labels than Apple because of his company’s choice to pay according to government guidelines instead of direct deals:
It’s not about lowering rates — that’s about creating fair rates across lots of distribution channels. We’ve put offers on the table where we commit to paying no less than we pay now in absolute dollars, and with increases on an annual basis. That hasn’t gone anywhere because of a lack of trust. It has created a situation where meaningful conversations for positive outcomes are going to be hard-fought wins. It’s going to take a long time to get there.
The executive also expressed his feelings about how Apple’s iTunes Store has been detrimental to the music industry by breaking down the traditional CD business.
One of the arguments against Pandora is that we’re trying to pay artists less money. We’d like to see artists get paid more. We also understand the mistrust comes from a pretty tough decade-plus in the music industry. First you had the piracy issues, which are still rampant, mostly internationally but also domestically. And you had the download platforms, specifically iTunes, that disintermediated the entire CD business, which was detrimental. There’s difficulty for people who have experienced these negative things to listen to reason.
Pandora CEO Joe Kennedy stated last month that the company was not worried about iTunes Radio, claiming that the company “did not see the picture changing”. Apple launched its service last month, with a report last week stating that the service would be coming to the UK, Canada, Australia, New Zealand, and more countries by early 2014.
Apple’s expansion could put its availability ahead of Pandora’s in some markets, as Pandora currently operates only in the U.S., Australia, and New Zealand. Pandora, which removed its 40-hour free listening limit ahead of the iTunes Radio launch last month, has remained among the top-grossing apps [Direct Link] in the App Store, with its Pandora One premium service being among the top in-app purchases overall.
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