Apple's iTunes Radio is 'credible threat,' says Pandora CFO

Just over eight years after launch, streaming radio service Pandora boasts some 72 million monthly active users in the United States, Australia, and New Zealand. Apple's iTunes radio gained more than 15 percent of that total only 11 days after its September launch, a "credible threat" which Pandora takes "very seriously," the company's CFO told CNET.

Herring said that Pandora is accustomed to fending off competition from larger players —  calling out Microsoft, Google, Apple, and Twitter —  and feels the service is well-positioned in the market because the company "does [internet radio] better than anybody else."

"The most recent entrants have all been large, well-funded companies that have agendas outside a really awesome music experience," he said, holding up hardware or digital download sales as examples of competitors' divergent interests. "We sell downloads, but the priority isn't to sell as many downloads as possible. It's emblematic of the difference."

Apple's iTunes Radio is marketed by Cupertino as a tentpole feature of the new iOS 7 mobile operating system, while Google similarly features Google Play Music All Access in its Android advertising. Both offerings, however, can also be accessed on cross-platform desktop players.

While defending the royalty fees Pandora pays to artists —  a common point of contention between the company and the music industry —  Herring shifted some of the blame for music labels' unwillingness to negotiate to Apple, saying that iTunes's domination of music sales has made industry executives gun shy.

"First you had the piracy issues," Herring said, before iTunes "disintermediated the entire CD business, which was detrimental. There's difficulty for people who have experienced these negative things to listen to reason."

As noted by CNET, Apple pays higher royalties for songs on iTunes Radio than Pandora does on its service, since Apple has agreements in place directly with the labels while Pandora pays only statutorily-mandated rates, similar to performance royalties paid when a song is used in a commercial.

Herring also expressed Pandora's desire to expand internationally —  Apple is said to be targeting more than 40 countries for iTunes Radio —  but noted that "there is nothing short-term for an international opportunity."

"What we're trying to do in Australia and New Zealand is...to prove to the world that Pandora's entrance into the market with the right rates structures is incredibly positive for the music industry in that region," he said.