Filip Novotny Streaming music services such as Pandora, Spotify or Last.fm have recently caught up with classic digital distribution in popularity. However, they are financially unprofitable. Will Apple find the key to dominating the industry?
Apple is closely associated with the music industry in the minds of many of us. iPod players helped the Californian company to a certain extent from a difficult situation in the late nineties, the iTunes store launched in 2003 then became the largest and most popular music distribution. Recently, however, according to some surveys (e.g. fy Nielsen Co.), streaming sites such as Pandora, Spotify or Last.fm have overtaken it. These services offer automatic creation of music stations based on song or artist selection and the ability to play them immediately in a web browser, music player or even on a mobile phone. The listener can also correct the composition of his station by rating individual songs. As with traditional radio, stations tend to be free, but subsidized by broadcasting advertisements. According to a newspaper report Wall Street Journal does not want Apple to be left behind and is preparing to come up with its own competitive offer.
However, several obstacles will stand in his way. The biggest one is the financial aspect: although online music services are very popular, they have one big drawback - they don't make money. All three major players lose units of up to tens of millions of dollars every year due to the huge royalties that companies have to pay to music publishers. The problem is that, for example, Pandora pays high fees according to a tariff issued by the US federal government, and does not have contracts with the publishing companies themselves. The rapidly growing user base, which is cumulatively over 90 million active users for the three major companies, does not help the return to the black numbers.
In this direction, Apple could be more successful, as it has long-term experience with major publishers thanks to its iTunes store. According to data from this June, over 400 million accounts are registered in the store. Although Apple does not indicate how many of them are actually active, it will certainly not be an insignificant number. Moreover, since the launch of iTunes in 2003, Apple has signed contracts with all the major companies in the music industry, despite their reluctance to have a fixed price policy. As the largest music distributor, it therefore has a strong negotiating position and could achieve more favorable terms than those set by the competition. Last but not least, he has millions of devices at his disposal, into which he could closely integrate his new service, thus ensuring a quick start and also covering the initial costs.
It is not difficult to imagine what such an integration might look like. The iTunes store these days offers a Genius feature that automatically suggests songs that go well with each other based on other users' data. This could be at the core of a new streaming service, which would then offer the currently playing tracks for purchase. Furthermore, it can be assumed that there would be a connection with iCloud, in which newly created stations could be saved, or perhaps support for AirPlay technology. All of these features could be available on millions of iPhones, iPods, iPads, Macs, and possibly even Apple TVs.
Although the matter is currently only at the stage of negotiations with individual publishers, it is expected that the service has a real chance of launching in a few months. Apple can certainly afford to delay for a while, but it cannot assume that it will succeed with the same model that the aforementioned Pandora offered, for example. For peace of mind, we also announce that it seems highly unrealistic for Apple to present this new service at some of this year's press conferences.
Thanks for the article. I don't know if it was just translated or written by the author, but finally a decent article. I haven't read this in a long time - THANK YOU
Below the article is the WSJ source, so it's a translation, but that's okay :)