Will web radio become more a feature than a business?

No one is making much money yet at internet radio but that doesn’t seem to be dissuading new entrants.

Last month came reports that Apple is looking to launch a Pandora-like web radio service (causing Pandora’s stock to crater). Now, Microsoft is preparing to launch Xbox Music later this month, a new service that will include both free, ad-supported streaming, like Pandora, as well as a more feature-rich subscription service, like Spotify.

The BBC is also reportedly looking to develop a musical equivalent of its hugely popular iPlayer for video that would give Brits who pay their BBC license fee access to hundreds of thousands of songs without paying any additional fees.

Why so much interest in a business that isn’t much of a business? Perhaps because web radio doesn’t necessarily need to succeed as a standalone business to make sense for a platform provider like Apple or Microsoft. Whatever streaming service Apple comes up with is likely to be integrated into iTunes, allowing users to purchase downloads instantly of songs they hear on the web radio service. Streaming, in that case, creates value for Apple (and the labels) whether it makes money in its own right or not.

Likewise, Xbox Music is an extension of Microsoft’s subscription-and-transaction-based Xbox Live platform. It creates value if it drives Xbox Live adoption. Even the BBC has a built-in monetization scheme in license fees that can pay for a range of digital content.

Web radio, in other words, is showing signs of becoming a platform feature, rather than a standalone business, in the same way that cloud storage is becoming a feature, even as companies like Dropbox and Box.net try to build a standalone business around online storage and sync.

As if life isn’t tough enough already for standalone web radio services.

Relevant Analyst
Sweeting

Paul Sweeting

Principal Concurrent Media Strategies

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