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Pandora-style internet radio services are growing faster than 'on-demand' options like Spotify, study shows

Pandora 4.0 for iOS

There's no question that the still-young digital music is rapidly evolving, with a variety of listening options competing for supremacy amongst music listeners. According to a recent NPD survey, Pandora-style internet radio and "on-demand" services like Spotify and Rdio displaced CDs as the second-most popular way to listen to music, trailing the venerable AM / FM radio format. Furthermore, internet radio usage is growing at a faster rate than on-demand usage. While a near-equal number of survey respondents said they listened to internet radio (37 percent) as those that said they listened to on-demand streaming music (36 percent), the total audience of those using internet radio grew 27 percent compared to last year. The on-demand music market, on the other hand, only grew 18 percent.

While there's no doubt that services like Spotify and Rdio offer the user much greater choice and flexibility, simple streaming radio still appears to be big with users, and companies are responding in kind. Earlier this year, Spotify began offering free music on iOS and Android devices through a Pandora-style streaming radio service. Previously, the only way to get any Spotify music on your mobile was with a paid subscription. Microsoft also is focusing on Internet radio as a tentpole feature in its new Xbox Music offering, and a number of rumors have pegged Apple's first foray into streaming music as a Pandora competitor.

Lots of users are content to let the internet make playlists for them

While streaming music has definitely captured mainstream attention, NPD noted that only half of internet users it surveyed said they used either internet radio or on-demand music streaming during Q2 of this year — so there's still room for the format to grow. And while NPD's survey can't be taken as gospel, the fact that many of music's biggest players are focusing on internet radio means that style of service isn't going anywhere; in fact, it may continue to grow. A Pandora-esque feature inside the aging but still-dominant iTunes could prove to be Apple's next killer app.

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