Apple Inc.'s Streaming Service Will Crush Pandora and Spotify

By Markets Fool.com

Tech powerhouse Apple has had music on the mind lately.

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According to reports, Apple is well under way in the development of an on-demand music service that will push the tech powerhouse's streaming capabilities well beyond the scope of its current Pandora Music competitor -- iTunes Radio.

It's widely believed this pending Apple product will steer Apple's streaming service toward on-demand streaming, the streaming bastion currently dominated by privately held firms like Spotify and Rdio. However, since this story originally broke, a fresh spate of details has emerged that investors in Apple and its competition will certainly want to watch. Let's dive in.

The new news
Thanks to reporting originally broken by Apple blog 9to5Mac, we now have a much clearer sense of exactly how Apple's upcoming on-demand offering will both look and function.

As many had suspected, the service's technological innards will lean heavily on the code Apple acquired from Beats' Beats Music streaming product, although the outer facade will match Apple's other music products. As was also to be expected, Apple plans on deeply integrating the new product across iTunes, iOS, and Apple TV. Perhaps most importantly, Apple will overhaul the Music app to incorporate the service on top of its current iTunes and iTunes Radio software.

The software will retain some key functions from Beats Music that have proved successful with consumers, such as its pre-existing thematic playlists, Activities and Mixes features, and its social networking capabilities. Apple will also launch an Android version of this app, mimicking its hugely successful strategy with iTunes on desktop. And in a not-so-subtle knock, Apple won't develop a version for Microsoft's Windows Phone. Lastly, the service's pricing remains in flux, but given the competitive landscape, a price point somewhere between $5.99 and $9.99 is a virtual certainty.

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What does this do for Apple?
Although we may have assumed many of these details simply by virtue of understanding the streaming industry as a whole, it's hard to see how moving into on-demand won't strengthen Apple's hand in a few ways.

With the looming release of this on-demand streaming product, Apple will now have what I'm naming here the "holy trifecta" of digital music -- direct ownership, radio, and on-demand -- all baked into a single app. This matters immensely as both Pandora and Spotify have pioneered and grown to dominate one element of the online music experience. However, they both failed to fully address all ideal aspects of the user listening experience. I personally stopped using Pandora in favor of Spotify Premium years ago, but I've always found Spotify's radio capability woefully inadequate. There are clear weak points in either offering that could be exposed if a more robust competitor enters the market. Why didn't Spotify and Pandora merge, again?

And now, so long as the final product doesn't end up being overly convoluted, Apple will able to offer powerful versions of both radio and streaming, while also leaving the door open for digital ownership should a user really feel the need to own a given track. I'm having a hard time seeing how this doesn't drastically tip the scale back in Apple's favor at the direct expense of its competition. However, there are a few minor risk factors that bear consideration, here.

What could go wrong?
As I mentioned above, I am concerned about the massive amount of functionality Apple apparently intends to pack into this single space. Putting iTunes, iTunes Radio, and now this unnamed on-demand service into under a single roof is an ambitious undertaking from a UI design perspective.

When he was helping design the iPod, Steve Jobs' used an unsurprisingly stringent constraint for his engineering teams. He required that the user should be able to access any a song or function in no more than three clicks, and it occurs to me that bringing a similar level of simplicity and intuitiveness to the new Music app's experience will be no small feat.

It's also important to note that Apple's new on-demand offering won't kill either Pandora or Spotify -- at least overnight. Each company is large enough, with diverse enough user bases, that Apple's introduction of this new service won't signal either's death. However, it will create a superior product and, thus, a very real challenge to both of their core businesses.

According to the report, delays between the Beats and Apple camps have pushed the likely launch date from early 2015 toward the summer. Apple has used its World Wide Developers Conference in June to unveil past iTunes upgrades, so I'd say circle your calendars for the WWDC keynote as the most likely launch date. And even if we haven't laid eyes on the final product, one thing's for sure: Apple's about to retake the lead in streaming in a big way later this year.

The article Apple Inc.'s Streaming Service Will Crush Pandora and Spotify originally appeared on Fool.com.

Andrew Tonnerstill wonders whether or not video actually did kill the radio star. He also owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), Google (C shares), and Pandora Media. The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), Microsoft, and Pandora Media. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.