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Apple to Challenge Spotify in Internet Radio

Music service expected to be unveiled at developers conference

Apple's anticipated launch of a new music streaming service will be the "highlight" of its annual Worldwide Developers Conference in San Francisco on Monday, The Wall Street Journal reported.

The company is expected to reveal a free, ad-supported internet radio that will expand the relatively small streaming market to hundreds of millions of iTunes users.

News outlets reported last week that after protracted negotiations with Sony delayed the project for months, Apple finally closed licensing deals with all three major music labels. Apple will sell ads through iAd and give recording artists a fraction of a penny for every play.

With little information available about the product, analysts are speculating whether Apple's streaming service will be a viable competitor to Spotify, Pandora and Google Play: All Access.

According to Forbes, Apple's internet radio service will be lucky if it snags 5 percent of the $1.1 billion music streaming market. Citing the lack of new hardware and the complex streaming business model that currently hinders Pandora's growth, Forbes predicted that Apple will fail to push into the crowded music streaming market like it did with mp3 players, smartphones and tablets.

James McQuivey, an analyst at Forrester Research, thinks Apple is too late in the game and will have to present something radically different to stand out in the crowded world of internet radio.

"It's going to have to innovate," McQuivey told The New York Times. "It can't just be Pandora with an 'i' in front of it or Spotify with an 'i' in front of it."

The music service announcement comes at a pivotal time for Apple. Without another breakthrough product on the horizon, Apple's stock has dropped significantly, and iPhone sales are stalling.

Gene Munster, an analyst at Piper Jaffray, sees Apple's streaming service as more of a brand control effort than a product success.

"If Apple were to equal Pandora's Street revenue estimate in CY14 of $875 million, it would add about 0.5 percent to overall Apple revenue," Gene Munster, an analyst at Piper Jaffray, told Fortune. "More importantly, we view the music offering as an opportunity to show consumers that they can deliver new, useful services with great experiences to make up for disappointments in Mobile Me and Maps."

Also at Monday's conference, Apple is expected to reveal new Mac notebooks and a modern, minimalist iOS redesign.

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