Apple Streaming Music Service Not Necessarily A Slam Dunk

It seems clear that Apple wants to get into music streaming in a big way, and as Josh Constine reported yesterday, Apple could even be looking at buying Taylor Swift’s record label. With Dr. Dre and Beats in the fold, Apple looks to be setting itself up for a monster launch, one that could sweep existing players like Spotify by the wayside.

There is a widely held belief that when Apple, Facebook, Google or any large company turns its attention to a particular technology, the smaller incumbents had better run for cover because they are about to get steamrolled.

Rivals would be wise to be concerned, and to put their best face forward at this point, but just because Apple wants to be your streaming service, it’s not guaranteed success by simply showing up.

I own an iPhone, and iPad and a MacBook Air, but that doesn’t mean I’m automatically going to use an Apple streaming service. I’ve been using Spotify on a daily basis for a couple of years now. Last year I started forking over $10 a month for unlimited commercial-free music, and while it doesn’t have everything I want to hear, it’s got a lot.

Apple would have to offer me something far better to get me to switch, and if it’s using iTunes software to deliver it, that’s going to be a huge limitation for me from the get-go. iTunes has always been the weakest link in Apple’s music delivery, and I avoid it if I can.

The iTunes Store is another matter. It’s got the credit cards on file and the musical variety going for it, but iTunes was created in a different time when people bought music. Apple has little choice, but to modernize at this point, and offer an all-you-can-eat streaming service for a single price. After buying Beats for $3.2B, it has taken its time, but presumably it’s working on a way to get a good return on that investment, part of which involves launching a streaming music service.

How To Grab Marketshare

Chances are, if Apple is true to form, it won’t try to take the market in one bold stroke. It will take aim at one or two small pieces and do that well, then build from there.  I suspect knowing it has to dazzle people, it will use its Beats assets as a draw. As Constine pointed out in his post yesterday, it could use the clout of Dr. Dre and music-industry legend Jimmy Iovine to lure big name holdouts to the platform. Some fans would come running to the platform simply because certain artists are only available on iTunes

But what if Apple simply used some of its considerable wealth to sweeten the pot and lure users to the platform? With their billions in cash, Apple can afford to give people a break on price and drastically undercut the market, while maybe offering a Beats headphones/streaming music bundle.

Whatever happens, even it’s not successful out of the gate, it has the resources to keep iterating and building on the early versions of the service.

Remember Ping?

Lest you think everything Apple touches turns to gold, remember when it tried to get into social networking several years ago? If you don’t recall, you’ll be forgiven because Ping was short-lived and forgettable. It launched in 2010 to much fanfare with Steve Jobs himself introducing it.

As TechCrunch reporter M.G. Seigler wrote at the time:

It’s like “Facebook and Twitter meet iTunes,” Jobs says. “But it’s not Facebook, it’s not Twitter,” Jobs is quick to note — “it’s a social network all about music.” And guess what? It has 160 million users in 23 countries built in right away (Apple will presumably be opening it up to other iTunes users later). And it’s available on your iPhone and iPod touch — right in the iTunes Store.

Most people ignored it. By September 2012, it was dead.

In spite of the benefit of having Apple’s considerable weight behind it, Ping still failed miserably. While the company probably learned a few lessons from that fiasco, it’s worth keeping in mind as Apple attempts to put together its streaming music business.

Spotify, et al, Still Have Advantages

No matter what Apple does, it’s still an Apple service, and that means Spotify and others have the benefit of working across platforms, and that’s going to count for something. Let’s not forget that more than 80 percent of the world’s phones are Androids.

Spotify also has other factors going for it including its own exclusive content like Led Zeppelin and Metallica, and I would expect to see increasing competition for free agent musicians, which will undoubtedly be good for artists who can play the different services off one another.

I expect we will see streaming market consolidation accelerate as Spotify scoops up some smaller adversaries to give it additional clout. While bigger doesn’t necessarily equal better, in this case, one big rival would probably be more competitive than several smaller ones.

It’s also important to remember that the streaming music market potential is huge and there is room for multiple players to thrive. Just because Apple offers its own streaming option, doesn’t mean it has to be at the expense of its rivals. Much like cell phones, the pie continues to grow and there’s plenty of room for multiple offerings. And let’s not forget, it’s entirely possible that people could use multiple services.

One thing is certain: Apple’s entrée into the market  is going to force everyone to up their game and that’s only going to benefit consumers, who when faced with a choice can weigh the different elements such as price, content variety, platform compatibility and other factors to make the best decision possible.

Apple surely has some advantage with Beats as it enters the market, but Ping taught us that clout only gets you so far. It’s still going to have to earn the business like anyone else.