The old guard of Pandora, Spotify, and Deezer are now competing with newcomers like Apple, Amazon, and Google for streaming music listeners — whether paid or free.
Streaming music online isn’t really a very good business to begin with. Subscription music services have to give up roughly 70 percent of their subscription revenues to the music rights holders, the labels. They then have to pay all operating expenses from the remaining 30 percent.
It wouldn’t be very surprising if some music services, especially newer ones, are operating at a loss.
And new free, ad-supported services like Google Music still have to pay royalties on music they stream that earns them no money.
The only real answer is to bulk up on user numbers, in whatever way possible. Then the small margins earned from selling subscriptions start to make sense.
That’s why so many music services have a free tier. They hope that users will get used to the service, use it more, then decide that the increased choice and control offered in the premium tier is worth it.
Apple has no free tier and has been vocal about its opposition to them. This puts it at disadvantage versus the rest of the major music streamers.
But there’s another way to attract and retain subscription users, and it’s simple: offer music from extremely popular artists on Apple Music that people can’t get anywhere else. Pharrell is teasing on Twitter today that his new single “Freedom” will be offered exclusively on Apple Music when the new service launches June 30.
The record labels have historically been averse to this strategy. Music rights holders have maintained an agnostic approach to distribution platforms. If people show up at this service or that, the labels want their content to be there.
Apple may be uniquely positioned to offer exclusive music despite the wishes of the labels. This is not so much because of the size of the iTunes user base as it is the massive connectedness and influence of Jimmy Iovine in the record industry.
In terms of content acquisition, Jimmy Iovine is to Apple what Ted Sarandos is to Netflix. He’s a serious heavyweight and may be able to carve out the exclusive content deals that will make Apple Music a preferred service.
When Apple introduced its new Music subscription service earlier this month at its Worldwide Developers Conference, it wasn’t easy to see what the service offers that isn’t already offered by existing services.
The music offering comprises three main parts: the Apple Music $10 per month subscription service, the Beats One live streaming radio station, and the Connect social network for artists and fans. So, basically, Spotify, DASH Radio, and Apple’s old Ping platform.
If the platform isn’t special, then the content will have to be.