No, Apple Music Does not Need a Free Tier (Sigh)

Since Apple Music was launched, people have been saying that Apple Music should have a free tier like Spotify. Michael Simon, writing on Macworld, wrote the following recently:

And if you break it down further, Spotify is eclipsing Apple Music. When Apple Music launched in June 2015, Spotify had just passed 20 million subscribers. That means it’s gained some 50 million users in the same span that Apple Music has gained just 36 million. You don’t need to be an analyst to see which number is bigger. In the face of strong competition from the largest company in the world, Spotify has nearly quadrupled its subscriber base, all without a single piece of dedicated hardware.

The reason is its free tier. Unless you’re counting the three-month trial period, Apple doesn’t offer a non-paid level of Apple Music, but its gains in the U.S. only make me wonder why it doesn’t. Along with 70 million paid subscribers, Spotify has more than 140 million active users who listen to its service with ads between tracks. Those are all potential paid customers, and I’m willing to bet that a large portion of Spotify’s 70 million paid subscribers started out on the free tier.

Nope. You just don’t get it.

The reason Apple Music is going to be successful is because it doesn’t have a free tier. People who want free have options: Spotify with ads, or YouTube, or a couple of other services.

As I’ve written many times, Apple doesn’t need to make a profit on Apple Music. They make a boatload of money on iPhones and other hardware; Apple Music is, to them, an extra. If they attract users to the Apple ecosystem, that’s fine. They have enough potential users that they can play the long game and not devalue music by having a free tier.

In addition, with a free tier, Apple would have the problem of ads. Given Apple’s careful attention to its image, they would not want to have to spend the time to vet ads so they fit well with the way they want Apple Music to be. And they certainly don’t want to spend time and money trying to convert free users to paid users.

As Jimmy Iovine said last year: “The fact is that ‘free’ in music streaming is so technically good and ubiquitous that it’s stunting the growth of paid streaming. […] Artists are getting screwed. Period. I don’t see how anybody stands behind it. It’s all of our responsibility to change it.”

As I wrote yesterday, the long game that Apple is playing is around a combination of music and video. Whether their video offering will be part of Apple Music or not isn’t clear yet, but it’s obvious that Apple is preparing a serious video service, that may or may not compete with the likes of Netflix. There’s much buzz about Apple commissioning original content, but not much about whether some or all of the iTunes Store video catalog will also be available to stream.

Look at Spotify’s revenue for the first half of 2017: $2.2 billion, which puts them on track to record about $5 billion in sales for the year.

Now look at Apple’s quarterly revenue for the holiday quarter 2017: $37 billion for the iPhone; more than $6 billion for the Mac; $8.5 billion for services (which includes the iTunes Store, App Store, Apple Music, iCloud, and more). Are they really worried about Spotify?

No, Apple doesn’t want those freeloaders; it doesn’t need them. Apple wants paying customers. They want customers who will pay them for both music and video, and Spotify only has music.

10 thoughts on “No, Apple Music Does not Need a Free Tier (Sigh)

  1. I agree with most of what you wrote, Kirk. I would underline the fact that streaming (all streaming) is bad for musicians. They get too little money for their creations, and the proportion who can make a decent living gets smaller and smaller. Therefore, our choices new music, for smaller genres, and for options outside mainstream pop, are shrinking, too. Ironically, streaming vastly increases our listening choices for old music. Streaming will ensure that “rock and roll will never die”, by making it hard for any new music to ever live.

    However, your quote from Jimmy Iovine seems to indicate that he thinks free streaming is harder on the artist than paid streaming. Is that really true? Does the pittance that artists get paid when a song is streamed really decrease, if the listener is using ad-supported streaming? After all, that ad is probably paying more per song than the paid subscriber is.

    Finally, I protest your use of the word “freeloader”. It is an often repeated error of the tech world, to insult people who use advertising-supported services that were entirely created by the tech world itself. Furthermore, those people bring in money- they are the product being sold to the streaming service to the advertisers. It would be closer to the mark (although still wrong) to say that Spotify is the freeloader, selling their listeners and their privacy to Google and other advertising clients.

    • First, artists are paid much less on ad-supported Spotify. So freeloader is an appropriate term: it’s people who generally don’t care much about music (and don’t care about hearing ads), and aren’t going to generate much income no matter what.

      Of course the tech world didn’t create this; TV and radio did. But you didn’t get to choose what you watched/listened to a la carte, and still don’t with broadcast or cable TV.

      I agree, though, about the potential stagnation of music, because it’s so easy to stream familiar music, because playlists highlight it, and because music has become so fragmented. It’s going to be a lot harder to get enough fans to fill a stadium, unless you have a top ten hit.

  2. I agree with most of what you wrote, Kirk. I would underline the fact that streaming (all streaming) is bad for musicians. They get too little money for their creations, and the proportion who can make a decent living gets smaller and smaller. Therefore, our choices new music, for smaller genres, and for options outside mainstream pop, are shrinking, too. Ironically, streaming vastly increases our listening choices for old music. Streaming will ensure that “rock and roll will never die”, by making it hard for any new music to ever live.

    However, your quote from Jimmy Iovine seems to indicate that he thinks free streaming is harder on the artist than paid streaming. Is that really true? Does the pittance that artists get paid when a song is streamed really decrease, if the listener is using ad-supported streaming? After all, that ad is probably paying more per song than the paid subscriber is.

    Finally, I protest your use of the word “freeloader”. It is an often repeated error of the tech world, to insult people who use advertising-supported services that were entirely created by the tech world itself. Furthermore, those people bring in money- they are the product being sold to the streaming service to the advertisers. It would be closer to the mark (although still wrong) to say that Spotify is the freeloader, selling their listeners and their privacy to Google and other advertising clients.

    • First, artists are paid much less on ad-supported Spotify. So freeloader is an appropriate term: it’s people who generally don’t care much about music (and don’t care about hearing ads), and aren’t going to generate much income no matter what.

      Of course the tech world didn’t create this; TV and radio did. But you didn’t get to choose what you watched/listened to a la carte, and still don’t with broadcast or cable TV.

      I agree, though, about the potential stagnation of music, because it’s so easy to stream familiar music, because playlists highlight it, and because music has become so fragmented. It’s going to be a lot harder to get enough fans to fill a stadium, unless you have a top ten hit.

  3. I think if there were a subscription service akin to youtube for music, things would turn in Artist’s favor; I don’t see ad-based streaming as an issue in an of itself, as there are plenty (relatively) of people on Youtube who make a decent living on monetizing their videos with ads… sure they’re the minority, but it IS possible, right? What do you think, am I missing the point?

    If I could “subscribe” to my favorite bands and get notified of their releases, and have the option to pay them or listen to ads with their music, and then get an actually reasonable recommendation of similar interesting music, they couldn’t take my money fast enough. So long as the subscription was either owned by the band itself (service-agnostic, which would probably never happen,) or I could download DRM-free copies of the music if I paid, I’d be happy.

    Why has no-one looked at what Youtube is doing for video, and simply done that for music? It seems like this would put so much power back into the hands of the artists, who could then generate their own buzz, get a good metric of subscribers/followers, etc, and open a line of communication to their fans, as well as generate new fans.

    Spotify seems like it just spits up stale playlists put together by people somewhere, and Pandora I think does a better but still crap job of figuring out what you like, but their playlists just feel like stagnant loops as well.

    Maybe I’m naive, but this is what I’d like to see as a listener, and I think it’d be good for musicians as well. What do you think?

  4. I think if there were a subscription service akin to youtube for music, things would turn in Artist’s favor; I don’t see ad-based streaming as an issue in an of itself, as there are plenty (relatively) of people on Youtube who make a decent living on monetizing their videos with ads… sure they’re the minority, but it IS possible, right? What do you think, am I missing the point?

    If I could “subscribe” to my favorite bands and get notified of their releases, and have the option to pay them or listen to ads with their music, and then get an actually reasonable recommendation of similar interesting music, they couldn’t take my money fast enough. So long as the subscription was either owned by the band itself (service-agnostic, which would probably never happen,) or I could download DRM-free copies of the music if I paid, I’d be happy.

    Why has no-one looked at what Youtube is doing for video, and simply done that for music? It seems like this would put so much power back into the hands of the artists, who could then generate their own buzz, get a good metric of subscribers/followers, etc, and open a line of communication to their fans, as well as generate new fans.

    Spotify seems like it just spits up stale playlists put together by people somewhere, and Pandora I think does a better but still crap job of figuring out what you like, but their playlists just feel like stagnant loops as well.

    Maybe I’m naive, but this is what I’d like to see as a listener, and I think it’d be good for musicians as well. What do you think?

  5. As a side note the fact remains that all one has to do is combine Chrome with Adblock and they no longer have to deal with ads on Spotify or Youtube.

    Anecdotally it seems young people prefer free, not sure if any studies break down how many free Spotify users are out there.

    But if you are older, how many iterations of your favorite albums do you need to buy, if you bought the cassette and the CD are you morally corrupt if you Audio Hijack a Spotify stream of said album?

    Is it any different than recording music off the fm back in the day or your friend’s cassettes or cd’s?

    Sure it is easier now but if your ears don’t mind slightly less kbps, why not record and save to your favorite mp3 player.

  6. As a side note the fact remains that all one has to do is combine Chrome with Adblock and they no longer have to deal with ads on Spotify or Youtube.

    Anecdotally it seems young people prefer free, not sure if any studies break down how many free Spotify users are out there.

    But if you are older, how many iterations of your favorite albums do you need to buy, if you bought the cassette and the CD are you morally corrupt if you Audio Hijack a Spotify stream of said album?

    Is it any different than recording music off the fm back in the day or your friend’s cassettes or cd’s?

    Sure it is easier now but if your ears don’t mind slightly less kbps, why not record and save to your favorite mp3 player.

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