Apple’s Next Surprise for Radio & Records

While the radio industry is doing everything it can to turn its stations into iPods, Apple – the undisputed leader in mobile entertainment – is preparing what eventually could be the final blow to the radio and records industry.

Apple is getting into cloud computing.

That is, with its purchase of the failed cloud service Lala last week, Apple is pulling a Warren Buffett and buying the brains and technology to one day make music libraries available anywhere, anytime on any device (presumably Apples).

This is a story worth following for those in the music business and radio industry because it will prove that they are headed in the wrong direction while Apple is cooperating with the inevitable once again.

And before I layout the potential Apple strategy in this area, it’s important to recognize that radio’s decision to cut personalities, implement networked Repeater Radio and utilize virtual voice tracking to save money is going to actually cost them profits – big time.

Not the money they are trying to save – but their franchises – because once cloud-based streaming takes off it will be a virtual customizable individual radio station available anywhere on demand.

And by "radio station" I mean a playlist because that's all radio is at too many stations these days.

If Pandora has proved anything, it is that music discovery is the franchise it took away from terrestrial radio.

Even iHeartburnRadio – the much publicized “radio app” of Clear Channel will really have no reason for being once cloud-based streaming comes of age. In many ways it has no reason for being now as most of the next generation’s consumers avoid radio through traditional devices and mobile phones.

Apple bought the four-year old Lala for an undisclosed sum but few predict that Apple will pick up where Lala left off.

Lala was a CD swapping service about four years ago. Then, it began to allow customers to make copies of their music collections in the “cloud”. Of course the music industry objected and that put an end to that until Lala relented and offered a model that let consumers either download or buy a tune for 89 cents or 79 cents or ten cents to be able to stream a song without limitations from the Internet.

Lala, it turns out, was just another good idea held back by the labels and not able to win the confidence of consumers unwilling to bet their music collections on a startup company.

But Apple is no startup company.

It surely is watching Spotify, the monthly paid service that offers streaming audio to consumers in Europe and soon here in the U.S.

As I have said in the past, it is doubtful that a paid model such as Spotify will work even for streaming audio and streaming audio is the new music radio. However, Apple, with a proven history of getting consumers to pay for 99 cent tunes, 99 cent apps for their mobile devices and even $99 a year for Mobile Me service could make cloud subscriptions an add-on through the iTunes store.

If that happens radio will run into a wall it could have avoided if it offered more than just music on the radio.

So while the record industry is trying to bully startup companies into paid models that have virtually no chance of public acceptance, Apple is about to one-up them again with this acquisition of technology and talent.

A generation has now grown up thinking the record store is the iTunes store – because to them it has been. And unlike brick and mortar record outlets before them, the iTunes people don’t stop with one idea.

And that brings us back to radio.

The major consolidators and therefore the many followers who ape their every move are probably scratching their heads about cloud-based streaming and trying to figure out ways to trick the Arbitron People Meter to drain the last available listener. While they are doing this, their trade organizations and research companies are pushing out "positive" news releases about how good old fashioned terrestrial radio is where everyone on earth turns for music.

This apparently makes them feel better, but their heads are up -- well, shall we say -- in the clouds – the wrong clouds.

The best defense against what Apple is likely to pull off – streaming personal libraries accessible without having to download the music and sync it with their increasingly popular mobile devices and their laptops – is personality radio.

The very kind of radio consolidators have killed off.

And personality radio has gone the way of the Christmas bonus – bye-bye.

Because the only thing that could save terrestrial radio from being a musical dinosaur is to get back in the entertainment, discovery and music business. In other words, enhancing what a consumer will be able to do with their music libraries alone. And even then, it's probably too late.

There was a time when radio’s advantage was that radio is available for free everywhere.

Now, a consumer’s music library will be available anywhere and Apple, not the record labels, will have the clout to set the price point.

Why listen to Cumulus, Citadel or Clear Channel run through its corporate playlist when you can hear your own and through a system that is trusted by almost everyone – Apple’s iTunes store.

The cloud is coming – probably not in the image of Spotify and certainly not Lala – but in the image of Steve Jobs as he does what his competitors still haven’t learned to do.

While radio and records have their heads in the clouds.

Jobs will be borrowing a phrase from The Rolling Stones singing, “Hey! You! Get off of my cloud”.

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