Apple Inc. (AAPL) is considering introducing an online service to stream music based on users' tastes, two people with knowledge of the plans said, potentially competing with Pandora Media Inc. (P)
Apple has held talks with record companies about acquiring the necessary music rights, said the people, who declined to be identified because the talks are private. The discussions are in early stages and haven't addressed issues such as terms, one person said. The service won't be part of Apple's new iPhone introduction next week, they said.
Pandora, based on Oakland, California, fell 17 percent to $10.38 at 1:59 p.m. New York time after being down as much as 21 percent for the biggest intraday drop since March. Apple, based in Cupertino, gained 0.6 percent to $680.52.
Apple is the dominant company in music, with its iTunes media store having more than 400 million accounts. A radio service that lets customers create online stations based on their favorite artists, songs or genre would add a new way for users to listen and discover music on the company's iPhones, iPads and Mac computers.
Apple is attempting to strike a deal directly with record labels to gain expanded rights to songs, the Wall Street Journal reported yesterday. The radio service may be supported by Apple's iAd advertising network, the newspaper reported.
Pandora pays a fixed licensing fee determined by a government agency. That arrangement comes with limitations, including how often listeners can hear a song. Spotify Ltd. and Clear Channel Communications Inc. (CCMO)'s iHeartRadio operate under similar terms.
In addition to the radio service, Apple also is planning an overhaul of the iTunes store by the end of the year, people familiar with the plans said in June. The changes will add new features for sharing songs as well as discovering new material, the people said.
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