Image: Forbes
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.
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There is a good opportunity for them to win this space the way they did with iTunes.
Human Curation? We could do with some of that for the App store too!
Agreed!
When Apple enters a new business, you know it’s not going to do so in a half-hearted, small way.
Citation needed? This is the company that has proudly stated for years that television is a hobby, the company whose social networking efforts consisted entirely of Ping, the company that built iTunes Match which only recently has started to work well, the company that built Photo Stream and is only just now maybe fixing it with iCloud Photo Library, etc.
Don’t get me wrong. When Apple executes well, they knock it out of the park. But it’s not a guaranteed certainty, definitely not enough so to lead your article off like that.
You’re not seeing things in perspective. Of course there will be a few failures to deliver amonst the dozens of new products, features and improvements Apple brings us every year.
Yea but Apple’s hits are mostly hardware and operating systems. Its failures are mostly in web services and things requiring cooperation with others :P
Apple loves music (positive) and will certainly put weight behind its $2 billion purchase (positive) but it is a web service (negative) and Apple is late to the game.
Let’s not forget maps
That has gotta hurt!
Of those, I would say TV is the only “new business” – and Apple very deliberately called it a hobby because it was simply laying the groundwork for a later move into the TV field. When that happens, it will be big, I’m sure.
I had brown hair when it first came up. Went grey now totally white no browns anywhere on the body. Not complaining, still got a head full. But when is the Apple TV going to be really really big. Only have so many years left!
They have a great idea… but both Apple and Spotify forgot something super important in their mix… call me, Apple, and for money I’ll explain it to you… :)
So far, Apple has not had the upper hand in terms of online services”. Think about Mobile Me, Initial iCloud (no drives)… On top of that, there are no word of service in Canada (where the legislation is extremely cumbersome)…. so, i’m not counting on this to make it a great service…. However, pouring $3B in something, i would guess they’d be serious about it… I guess we’ll see but so far, online services from have not swept me off my feet.
dotMac has never failed on me. Not once in all those years. But there are things that do not ‘simply work’ anymore, or only work intermittently, like Photo Stream.
Adding “beats” is not the first thing that is needed for “iTunes for computers”.
It’s probably somewhere near #42.
And you’ve heard what the answer to the universe is, right? 42!!!
Human curation is nice, especially when having those recommended songs right alongside the purchased ones from iTunes in one app. But I’m afraid that people paying 9,99 a month won’t even consider this new service if it’s just going to save them $2 a month.
What are Humans?
If Apple goes the same route as they did with iTunes Radio, the answer is a resounding no. 2014 has called and said Apple failed at expanding outside of the US.
Won’t have any impact outside USA because they won’t launch it anywhere else, like Canada. I am pretty confident that I will still be using Songza and Soundcloud here a year after Apple launches because it simply won’t be available here.
The downside for me about streaming music, even using iTunes Radio is data. The only time I really listen to music is when I’m driving. I would LOVE to use these features for my road trips, but to bump up data and pay an extra $20.00 a month to do so isn’t worth it. $30.00 a month to listen to music? I’ll just make a playlist unfortunately. Wish they could bypass by downloading on a wifi and being able to play back later without using data.
Which is exactly what Spotify can do. It’s what I do; tag music I like, create a playlist once it has become large enough for my cycling needs and simply tick ‘available offline’ while connected to my home WiFi.
Ivebeen usng Spotify so much these past two years I don’t think there much data for Apple to grab from my neglected iTunes use. And to think that anyone here in The Netherlands got a Spotify Premium account merely because they upgraded their ISP bandwidth I do not think Beats will be come a global hit at launch.
I have a feeling that the iTunes brand is going to disappear. Create a “Music” app in OSX and have streaming and local music integrated into a single package without a specific name other than “Apple Music”.
I agree. Apple is moving away from putting ‘i’ in front of everything. They are starting to move away from the emphasis on iOS and more towards a whole brand image of Apple.
Unless cellular data becomes cheap and uncapped (or wifi is available anywhere on the planet), streaming is a problem instead of a solution….Please, Apple give us back an iPod with 120GB of storage to fix the problem you created and try to fix with a paid subscription service!
You simply don’t understand how things work. Why leave a comment if you have no idea what you’re talking about?
As with other streaming services before it, you’ll be able to download DRM music for offline listening. If you cancel your subscription, the next time your device connects to data, the server sends a ‘delete’ command. This music self deletes, leaving your own purchased music behind. If you listen to something over and over through streaming the app might even suggest you download it.
Many people forget but Microsoft already did a non-streaming version of Spotify/Beats Music/Rdio with their Zune player in the early 2000s. Now, if they could just get their act together and jump back in the game, rather than calling it a failure.
Apple is very late to the party with this. People who have spent the last two years saving thousands and thousands of Spotify songs into playlists wont want to start over with Beats. If Apple could offer some sort of scan your spotify playlist and import the same songs into Beats they might have a chance other wise. Too little too late.
People? Spotify represents 2% of iTunes installed base!
Thats an ignorant statement because the iTunes install base arent all in the subscription market. Probably 2% are! You think everyone with iTunes will buy Beats now genius? Nope, Spotify already gobbled up the ones who will pay for that kind of service. You think the other 98% have just been holding out for Apple Beats? Thats laughable.
I wonder why Apple doesn’t look for growth outside the US
You mentioned 15 million Spotify subscribers, which is just 2% of total iTunes user base. In other words, music streaming is barely a meaningful service in terms of the overall use. As with any service or product category Apple is known to bring to mainstream, I think ITunes music streaming will finally change how people consume and listen to music. I completely agree that the biggest selling point here is that there is nothing to install or set-up. How many iPhone buyers really invest time into searching and installing apps? I would say that an average iPhone user ends up using what is pre-installed on the iPhone. Once streaming will be part of the Music app, streaming will reach that average consumer. The sheer volume of install base will finally start bringing meaningful revenue to music artists, infused with Iovine music deals. I think eventually, Apple may negotiate the monthly price down. I am also wondering how Apple is planning to treat ITunes Match subscribers.
Music downloads aren’t going away anytime soon for sure, but the trend is underway: http://9to5mac.com/2013/12/16/have-music-downloads-hit-their-peak-with-streaming-taking-over/
There’s something else Apple could do that would differentiate its service from the competition: offer parental controls. iTunes already has great support for preventing explicit lyrics appearing in iTunes Radio, and the iTunes library has arguably the most accurate information regarding songs with explicit lyrics. None of the other players, save for Xbox Music, has a strong parental controls option. Using Family Sharing as the backbone, Apple could offer family plans for their service where parents can allow their children listen explicit-free on their devices.
“When Apple enters a new business, you know it’s not going to do so in a half-hearted, small way. ” Really? Did we forget about Ping already?
My guess is that you’ll be able to strictly use your own purchased music if you desire. Therefore you’ll still have the human curated playlists, without having to subscribe to the streaming service. On the other hand, subscribing to the service would obviously make the experience better, in that the number of songs in a given curated playlist would be much larger, and more in tuned to what the curator had in mind.
Wouldn’t “Apple Beats” sound better than the other way around? lol.
Apple’s iTunes radio was suppose to kill Pandora, at least take a huge hit. That didn’t happen. I say good for Pandora that didn’t go running to the Government calling Monopoly or some such garbage. They took Apple head on and just made the service even better. Even I thought I’d just move to Apple. At this time I still use Pandora about 90%+ of the time. I like the randomness of of Pandora and Apple radio. Pandora does more music I like. I also like the interface a whole lot more. Apple’s really kind of sucks. It should have it’s own App. have a better Thumbs Up/down then they do, etc.
I still don’t get BEATS at all. I think Apple paid 3 times more then it was worth at minimum. Like they have so much money that it really didn’t matter how much they paid. For as much as they spent, I think that money could have gone to a number of other better things.
Here’s hoping that they’ll take their usual laid-back approach to geolicensing issues, allowing anyone who has a U.S.-based iTunes account, address, and payment method, rather than forcing a GPS/IP address check as many other services do.
I’d say – Apple Beats :D Sounds good ;)
Only if they increase quality to 320 kbit/s. I find iTunes Match to be sorely lacking in quality of audio compared to Spotify, and until Apple increases their quality I’ll likely choose Spotify over Apple iBeats Music or whatever they call it
No mention of lossless capabilities? I was a MOG/Beats subscriber till TIDAL came out. If Apple were to step up to lossless, you would have a game changer. It will be interesting to see what the new owner, Jay-Z does with TIDAL.