This Is Music to the Ears of Apple Inc. (AAPL) Shareholders

There’s no need to speculate any more. Now, it’s official. Apple Inc. (NASDAQ:AAPL) is launching a music streaming service called iTunes Radio. The company announced the new service on Monday at its World Wide Developers’ Conference along with new mobile and desktop operating systems. The iTunes Radio is expected to launch in the U.S. sometime this Fall. Apple Inc. (NASDAQ:AAPL) is joining the radio space after rival Google Inc (NASDAQ:GOOG) decided to launch its own music application.

Very interestingly, rather than embrace Apple Inc. (NASDAQ:AAPL) and downplay Pandora Media Inc (NYSE:P) and Google Inc (NASDAQ:GOOG), Apple’s main rivals in the radio and music space, the market reacted quite the opposite. Shares of Apple fell about 1% while Pandora’s and Google’s have gained 2.5% and 1.25%, respectively.

On music and financials

Making money from music to the masses is an extremely strenuous task. You have to walk on a very tight rope between the artist, the record company and the technology company that makes the music device. You’ve got plenty of examples when it really isn’t clear who deserves to get paid and how much. If a listener began playing a song and then skipped it, which party should receive the royalties from that song? It’s no wonder that it took Steve Jobs seven years to launch iTunes. The majority of which was devoted to solving legal and business disputes between the aforementioned parties. So how is the iTunes Radio going to bring in money for Apple Inc. (NASDAQ:AAPL)?

The business model

The new iTunes Radio allows users access, for free, to ad-supported streaming music. However, it will be sans ads for those who subscribe to
iTunes
Match, which is a paid service-costing $24.99 a year that enables users to store all their content in Apple Inc. (NASDAQ:AAPL)‘s iCloud. In simple words, Apple either makes money from adds or from a continued ongoing customer relationship. That’s smart. But more than just another source of income, the new feature will give a few points to Apple in its mighty fight against Google , its real competitor. First, by adding new services, Apple is seeking to blunt the advance of Google Inc (NASDAQ:GOOG)’s Android mobile operating system, which now runs on 74 percent of smartphones, compared with Apple Inc. (NASDAQ:AAPL)’s 18 percent in the first quarter, according to research-firm Gartner. Second, it will compete head to head against Google’s “All Access.” Google recently launched a music paid subscription service competing with the likes of Rhapsody, Rdio and Spotify, but has not entered the free, advertiser-supported streaming radio business.