News broke today that Rdio is effectively shutting down: The five-year-old company is filing for bankruptcy, and competitor Pandora is swooping in to buy “key assets” for $75 million. It’s a sad day, but anyone who has been watching the online music market knows that it was inevitable.
Indeed, Rdio never disclosed user numbers, but estimated numbers were always a far cry from those of the competition. A lot of this came down to the fact that the big players had a massive head start: Pandora was founded in January 2000 and Spotify in April 2006, while Rdio only showed up in August 2010.
Spotify, which is available in 58 countries, had 75 million active users, as of June 2015. Pandora Radio, by contrast, is available in just three countries (the U.S., Australia, and New Zealand) though it counts 79.4 million active users, also as of June 2015. (It’s really no surprise that Pandora, which relies on advertising revenue, wants Rdio’s assets in order to try its hand at offering a subscription service in more countries.)
If Rdio had anywhere near 70 million users, it would have started sharing its numbers, pointing out that it took less time to get there. But the startup has been quiet on that front for five years, and instead spent its time copying and matching Spotify’s moves.
Let’s start with Microsoft, because many will point out that the company has long tried offerings like Xbox Music and Zune Music. That’s true, though in July, the company rebranded Xbox Music as Groove (and Xbox Video as Movies & TV).
As we explained at the time, the new names were more than just a rebranding effort: This was part of Microsoft’s larger strategy to become a major player in the business of selling digital music (and movies and TV shows). Indeed, both services ship with Windows 10, which, one must remember, the company is aiming to have on 1 billion devices “in two to three years.” Whether Groove will succeed or not is a separate debate, but there’s no doubt that Microsoft will spend a fortune trying to push Windows 10.
Google’s music strategy is probably the most convoluted of the three, but here again, the big moves came in 2015. While Play Music started as an on-demand and locker service, the company launched a free ad-supported version in June and is also planning to roll out a family plan “later this year.”
Then there is the YouTube Music Key subscription service, which came out of beta in September. Oh, and don’t forget that YouTube Music launched on Android and iOS this month. So yes, it’s definitely confusing, but nonetheless, such moves mean “Rdio” would have had to compete with brands like “Google” and “YouTube.”
Speaking of big brands, Apple launched Apple Music in June, following the acquisition of Beats last year (Beats Music is shutting down at the end of this month). Apple, which doesn’t release apps or services for any platforms but its own (unless there’s a direct benefit), even launched Apple Music on Android this month.
Apple naturally won’t be able to convert all trial members to paying customers, for a variety of reasons, but that doesn’t matter. Apple has more money than any other company on the planet, and it’s not interested in losing.
In short, the three tech giants are pushing their own music services on Windows 10, Android, and iOS. Because licensing and customer acquisition are both very expensive, subscription music is a very low-margin business. But this trio doesn’t have to worry about that: Music is just a way to woo users to their platforms and services.
So if you don’t have deep pockets and a major operating system, you’d better at least have tens of millions of users. Have none of the three? Your days are numbered.
Remember when Rdio “welcomed” Apple to the digital music industry? Five months later, and the jab doesn’t just look nonsensical, it’s sad.