Does Apple’s Partnership with iHeartMedia Make Sense?

Stations reach over 370 million people

Apple (AAPL) is exploring partnering with iHeartMedia, according to the Financial Times. A partnership between the two could involve Apple acquiring a stake in iHeartMedia, buying a piece of the radio group’s business, or teaming up with the radio group on marketing.

In the United States, iHeartMedia operates some 850 radio stations, making it the country’s largest radio group. It reaches more than 370 million people through its broadcast and online radio services. Given this massive audience, Apple could use a partnership with iHeartMedia to increase awareness of its own music services, such as the Beat 1 online radio station and Apple Music.

Does Apple’s Partnership with iHeartMedia Make Sense?

Apple could face music competition in the coming months

Sirius XM (SIRI) and Pandora (P) are about to join forces in a merger, which could result in stronger competition for Apple in the music market. Given iHeartMedia’s extensive reach across the United States, Apple could gain more ammunition to fight back against the escalating competition if the two reach an agreement to collaborate.

Music providers going for partnerships

Amid intensifying competition in the music market, providers are favoring partnerships to strengthen their competitive positions. Spotify (SPOT), Apple’s chief rival in the online music business, has struck a deal that makes it the default music app on Samsung (SSNLF) devices. Samsung typically sells more smartphones than Apple, according to Gartner data. Pandora has also cut music deals with T-Mobile (TMUS) and Snapchat (SNAP), allowing it to extend its reach.

While iHeartMedia could be an ideal music partner for Apple, the company is struggling with debt that has pushed it into bankruptcy.

Apple made a profit of $14.1 billion in the fourth quarter of fiscal 2018. It exited the quarter with $122.6 billion in net cash.