Innovation at Apple: Fact or Fiction?

Terry is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The last time we heard CEO Tim Cook introduce Apple (NASDAQ: AAPL) products at a convention was eight months ago. Apple recently announced news about iRadio, a new service that the company is bringing to its users. So what is the problem with this new radio service? Basically, it is the same in essence as other music service competitors that exist on the market. Apple is having trouble innovating with new products like it used to back in the days! The other major competitors in the online radio space are Pandora (NYSE: P), and Google (NASDAQ: GOOG)

Can iRadio survive?

There are many new routes to innovation that Apple could have taken. A lot of consumers were hyped up for some really big news, but all that they got was a new radio service from Apple. There was also a new version of iOS introduced, but it contained nothing groundbreaking. What should be noted here is that Apple didn't take the time to create a different user experience. The software is an exact replica of another online music service, Pandora. I don't see why users would want to switch from Pandora over to iRadio.

I will give Apple the fact that iRadio has one good thing going for itself when it launches later in the fall to many users. The iRadio will be able to be used on iTV. But if the software is the same as Pandora, can it really compete? Investors also have to remember that the space is already crowded with Pandora and Google's music service. I would think that Apple should be able to innovate a little more than copy from competitors, and at the very least create a different type of user interface. 

Google in the mix

Google's music service is known as All Access for Google Play. Starting on June 30th, users will have to pay to have access; the fee has been set at $9.99 per month. This gives users access to an available collection of 18 million songs. Here is the odd par:, Google is releasing an app on iOS devices for its music service. So Apple will have plenty of competition in this space. 

Google is a powerhouse as a technology company. That's not to say Apple will be blown away, but at the same time it will not dominate the online radio sector. Google is already the biggest in search, and is not afraid to make acquisitions to increase its value.  As we have seen, Google is not afraid to try new ideas like Google Glass. This is what investors would like to see with Apple, taking technology to the next level. 

Pandora's box

Pandora's service basically allows users to generate music playlists to their own liking. Users can select artists that best fit with their taste in music, and then the service picks more music that is similar to the original choice. Pandora makes its revenue from online advertising sales and is free for many users. As with other social media companies, however, a lot of the growth is shifting to mobile ads. Pandora reported mobile revenue growth of 111% to $80 million in the fourth quarter. 

Apple would have to compete against Pandora, and all other music services. We know that Apple has the cash to throw into this online radio sector, with on-hand cash totaling $141 billion. Investors have to wonder if this is the track that will make Apple successful in the future as an innovator, though. What I think a lot of investors would like to see is acquisitions of technology companies that complement Apple's strategy. The company could then use those acquisitions to innovate new ideas for the tech field. 

Final thoughts 

Apple now has the opportunity to keep its share price and investors intact. The company started offering a dividend for value investors, but it needs to show that it is still a growth company. Apple needs to be more innovative like Google, and not just copy the sectors that are out there. The new online radio service is great as a feature, but it will not give Apple a future to look forward too. There has to be some kind of change at the company, or else innovation at Apple will be fiction.

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Terry Chrisomalis has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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