Apple Seeking to Eradicate Free Streaming

Apple is trying to get music streaming companies such as Spotify to stop offering free, ad-supported streaming. As reported by The Verge:

“The Department of Justice and the Federal Trade Commission are looking closely into Apple’s business practices in relation to its upcoming music streaming service, according to multiple sources. The Verge has learned that Apple has been pushing major music labels to force streaming services like Spotify to abandon their free tiers, which will dramatically reduce the competition for Apple’s upcoming offering. DOJ officials have already interviewed high-ranking music industry executives about Apple’s business habits, but it appears the FTC has taken the lead in recent weeks.”

Apple’s foray into the music streaming market will not have a free tier, according to the many rumors that circulate about Apple’s rebranding of Beats Music. It is certainly in Apple’s interest to not have to compete with free, and it’s no surprise that the major labels would like free streaming to disappear as well. If there were no free, ad-supported streaming, then Apple would find it much easier to compete in this market.

The problem, however, is that Apple seems to be trying to strongarm other companies into giving up on free streaming, even, according to the Verge article, by offering to “pay YouTube’s music licensing fee to Universal Music Group if the label stopped allowing its songs on YouTube.”

While Spotify is one competitor for streaming music, YouTube is the 800-pound gorilla of streaming. Even though it is not designed for that, pirated music uploaded to YouTube – often with static graphics instead of videos – turned YouTube into the go-to service for young people looking to hear the latest hits. Over time, YouTube has managed to eradicate a lot of pirated music (but far from all of it), monetizing “official” uploads with ads.

YouTube has shown is that for a large segment of music listeners, interface doesn’t matter. “Social” features are unimportant; curated playlists are moot. People just want music, and they go to YouTube, search for a song, and listen to it. It’s clear that these users – and I’d guess that they are a very large percentage of those who stream music – won’t ever pay for a streaming service, because they simply don’t care about the features it offers.

I don’t think that Apple is competing with YouTube. I think the demographic Apple is chasing is the Spotify user, or the Pandora listener. Getting labels to leave YouTube won’t have much effect on the number of subscribers Apple can garner. While the labels might prefer a captive subscriber base, there’s simply no way that they can convert all these YouTube listeners into monthly payments.

Music streaming is about to become mature, with the introduction of an Apple service. There will be a shake-up; whether this is about free or more competition remains to be seen. Apple certainly doesn’t want to compete with ad-supported streaming, but can anyone really get all those “free” listeners to pony up a monthly fee? I doubt it.