Market Overview

Apple's Spotify Competitor: What The Blogosphere Is Saying


Apple Inc. (NASDAQ: AAPL) is expected to unveil its brand new music streaming platform to the world next Monday at its Worldwide Developers Conference.

Apple's iTunes service accounts for about 80 to 85 percent of global music downloads, but downloading music is getting less and less popular. Meanwhile, streaming is the only form of music consumption that is on an uptick internationally.

According to Nielsen Soundscan, music download sales fell 8 percent in 2014 to $3.6 billion, while streaming revenue jumped by 45 percent to $1.6 billion. Spotify holds about 86 percent of the streaming market in the United States, with its foreign share approximated to be at around the same level.

Apple will reportedly charge $10 per month for its new service, and unlike Spotify it will not offer a free ad-supported version. However, it reportedly plans to supplement that streaming platform with a bevy of ad-supported radio stations, possibly featuring celebrity DJ's of the likes of Drake.

Related Link: Can Apple Convince Spotify Users To Pay $10 A Month For Music?

What are others saying?

The Wall Street Journal

The WSJ's Ethan Smith says the announcement could be a watershed moment in music history, as streaming transitions from the up-and-coming to the mainstream. Apple, he believes, will likely be able to push its hundreds of millions of iTunes customers to embrace a subscription model on the same devices they already use every day.

According to Smith, Apple may be prepared to "cannibalize" its downloading business in favor of the new service. He points out that it should be easy to convince people buying albums for $10 each to pay the same price on a monthly basis for access to a virtually unlimited catalog of songs.

But Smith also highlights one major risk. He claims that the average iTunes user only spends about $30 annually. The subscription service, however, would cost $120 a year. If it can persuade a significant number of iTunes users to make the switch, Apple would enjoy a sizeable revenue boost. On the other hand, the relatively expensive streaming service could drive away customers.


Billy Steele notes that outpricing its competitors must not be a part of Apple's strategy, since the $10 monthly price tag would put it on par with Spotify and other similar platforms.

Instead he said the company might give itself an edge by offering exclusive content and early releases. Taylor Swift and Florence and the Machine were two artists rumored to be involved in this initiative.

Finally, according to Steele, Apple has already locked down licensing agreements with Universal Music, Sony, and Warner Bros., three of the top players in the industry.


Oscar Raymundo says that Apple could offer a free trials to draw users to its new platform.

It will also, he says, allow record labels and artists to provide select songs available for free listening. This will provide an opportunity to tease up-and-coming artists or highly anticipated albums.

Raymundo believes that if Apple can finally launch a successful voyage into the streaming industry, it will finally be able to justify its $3 billion acquisition of Beats Music last year.

Yet, he warns readers to be cautious. Despite all the hype and excitement, Apple has reportedly been unable to reach licensing deals with three major record labels less than a week away from the announcement.

Venture Beat

VB's Chris O'Brien, unlike most people, is skeptical of Apple's foray into the music streaming industry. He calls the venture "a distraction, at best, for a company that's selling a gazillion iPhones every quarter."

O'Brien points out that iTunes revenue from the past six months ($5.4 billion) is actually up compared to the same period a year ago ($5 billion). While he admits that music sales were down, these were more than offset by an increase in App Store revenue.

Furthermore, although Spotify did generate $1 billion last year, O'Brien believes this figure is virtually insignificant next to Apple's $75 billion last quarter.

He summed up his thoughts on the streaming service rather bluntly: "Why bother? If it isn't helping you sell iPhones, then it seems like a lot of effort for little gain."

Posted-In: Apple Inc.Rumors Movers Tech


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