When Apple enters a new business, you know it’s not going to do so in a half-hearted, small way. When it launches its Apple-branded Beats Music service later this year, it’s a no-brainer to predict that it’s going to be a big deal for the music industry. With Apple’s deep integration of Beats into its existing iOS/iTunes ecosystem exclusively revealed by Mark Gurman added into the mix, I wonder whether the unique selling points being notched up by Apple could be enough to leave existing big-name players like Spotify, Google Play and Rdio dead in the water?
That’s rather a grand idea, of course. As of last month, Spotify reached 15 million paid subscribers–up 50% in the last six months alone. Beats Music had only a little over 100,000 subscribers at the time Apple bought the company, and is rumored to have only 2-3 times as many now. But an Apple-ified Beats Music service has four things going for it …
First, the service itself is good. So good that our Zac Hall, a long-time skeptic of the idea of renting music rather than buying it, found himself recommending it to anyone who would listen.
Other streaming music services build their playlists using algorithms. At their simplest, they look at who listens to a particular track, then checks what other tracks those people listen to, and throws all those tracks into a playlist or radio station and calls it good.
Beats Music is different. It replaces algorithms with human curation. Real people, with a good ear for genres, styles and sounds, make the decisions. The company boasts that its music curation team comprises experts with a deep understanding of the music industry that comes from more than 300 years of combined experience.
Second, the ecosystem integration.
Rather than merely installing the existing Beats Music app onto iPhones, Apple has decided to deeply integrate Beats into iOS, iTunes, and the Apple TV. The company is currently developing new Beats-infused versions of the Music application for the iPad, iPhone, and iPod touch, as well as an updated iTunes application for computers that deeply integrates Beats functionality.
In other words, you won’t have to open up a new app to be pulled into Apple’s new streaming music world: it will come to you. Anyone with an Apple device–together with anyone running iTunes on a Windows machine–cannot help but be aware that the new service exists. It’ll be right there, front and center.
But that degree of integration goes beyond free marketing. It effectively means that the line between your purchased music, and the streamed music available from the rebranded Beats service, will be blurred. While there is no doubt that streaming is the future, there are still plenty of people clinging tightly to their large collections of purchased music, reluctant to embrace the idea of switching instead to streaming. Apple’s integrated approach offers a way to bring those streaming refuseniks on board …
Instead of asking us to choose between purchased and streamed music, it will be delivering a service that blends the two together. No longer will we have that uncomfortable feeling that if we choose to stream music, our investment in purchased music was wasted. Instead, our existing music library is used as a base for streaming recommendations. We can listen to a mix of owned and rented music within the same apps. That’s a strong sell.
Third, the possibility of artist or label exclusivity. We’ve already seen a number of iTunes exclusives, from the Beatles to Beyoncé. We’ve also seen artists like Taylor Swift pull their music from Spotify while remaining available on Beats.
Apple could simply choose to double down on its exclusivity arrangements. In general, iTunes has enough clout that it doesn’t have to work hard to do so: it likely has artists queueing up to sign exclusivity deals in return for the publicity these generate. With even Grammy artists unhappy with the deals offered by services like Spotify, Apple wouldn’t need to make too strong a pitch to suggest that they might like to strike a better deal with Apple. In return, Apple gets exclusive streaming rights either for a limited period, or even permanently.
If certain artists, or even entire labels, could only be streamed on Apple’s service, that would be a very good reason for customers to subscribe to Apple rather than to competing streaming services.
As Josh Constine observed today on TechCrunch, there is even the possibility we raised back in May of last year: that Apple could become a record label. Jimmy Iovine knows the music business better than anyone. He has the contacts and the credibility to sign big-name artists. And if Apple controls the label, it gets to choose which of its competitors do and don’t get access to those artists.
Finally, price. While it appears that Apple has been unable to hit the $5/month target it reportedly set, $7.99 still puts it comfortably below Spotify’s $9.99. Spotify and others can of course hit back (and it’s likely that a significant chunk of Spotify’s recent growth has already been driven by discounts and promotions), there’s a limit to the sustainability of engaging in a price war. Apple’s financial strength–coupled to Iovine’s negotiating skills–means that it is far better placed than its competitors to emerge unscathed.
Do I think all of this means that Spotify, Pandora, Rdio and others will all be driven out of business? No. There is room enough in the market for more than one player. But I do think that competing services are going to be hit far harder than many now expect, and a casualty or two along the way seems to me all but inevitable.