Apple Music’s Big Hurdle

Wwdc logoApple is expected to announce Apple Music, the company’s streaming music service, at the Worldwide Developer Conference today. This service will be taking on established players such as Spotify and Pandora, and, with Apple coming late to this party, will they be able to compete?

On the one hand, Apple is going to have to overcome mature services, such as Spotify (60 million users; 15 million paid users) and Pandora (79 million users). On the other hand, Apple has more than 800 million existing users around the world, and this may make it relatively easy for the company to at least get a share of these users to try out the service.

Also, while Spotify is available in 64 countries, Pandora is only available in the US, Australia and New Zealand. It’s likely that Apple Music will be available in a large number of countries from its launch, giving Apple an advantage over the smaller services, but perhaps not over Spotify.

One way Spotify has developed a committed user base is through the service’s integration with Facebook. This means that users can share what they listen to, if they want. (For a while, Spotify required that users have Facebook accounts; this is no longer the case.) Apple tried, and failed, with a “music social network,” the infamous Ping, and it is rumored that they will bring back something similar with Apple Music. But it’s important that Apple Music also link well with Facebook and Twitter.

Apple’s big hurdle is unseating Spotify, but if Apple Music is as transparent as I think it will be, this actually might be easy. Remember that Apple doesn’t need to make a profit from Apple Music; they’re using this as a way to get people to buy iPhones and iPads. Spotify lives and dies from its user subscriptions; Apple can break even, or even lose money, and still be happy.

Rumors say that Apple will offer three-month free trials to Apple Music. Apple is even rumored to be releasing an Android app, extending the reach of Apple Music. With this in mind, it’s clear that lots of users will try the service.

Of course, Apple has to compete with free, ad-supported services. One of the big unknowns is whether Apple can convince iTunes users to pay a monthly fee, rather than listen to ads on Spotify.

Apple has already redefined the music industry once; can they do it again with Apple Music? We’ll know later today exactly how they plan to try.

Here’s How Apple Could Make Music Streaming Work

Update: I originally wrote this article in April, 2014. It now seems that Apple will announce a streaming service next week. I wonder if it will look like this.

The word is out that iTunes Radio isn’t performing as Apple had hoped. Album sales are down, streaming revenue is up. iTunes Radio may not be the appropriate model for Apple to use to compensate for a drop in music sales in the iTunes Store. It is said that Apple is in talks with record labels to set up a music streaming service. This wouldn’t be like iTunes Radio, but an on-demand streaming service, like Spotify and others.

I looked at the math in Is Streaming the Future of Music?, but now I want to look at how I think Apple could make a streaming service work. My main points here show why I don’t like current streaming services; obviously, other listeners have other ways of listening, so their ideas may be different. Feel free to post comments about changes you would make to have a streaming service that works for you.

My guess is that the occasional listeners – the ones who want to listen to songs, or use music as wallpaper – will continue with ad-supported streaming services, but album listeners, or those with broad, eclectic tastes – the ones who keep the music industry afloat – would be willing to pay, if these services welcomed them. (I’m going to leave aside the use of a streaming service as “radio,” using it like iTunes Radio or Pandora.)

Any such streaming service will include radio stations, perhaps just a slightly modified version of the current iTunes Radio, and “curated” playlists. Frankly, I find the latter to be cheesy; if you look on Beats Music, you see playlists of music for barbecues, beach parties, etc. I can’t see that such playlists cover the tastes of all those who have barbecues or beach parties, and they seem like fluff to me. (I wonder how many people use that kind of playlist…)

Here’s what I think needs to be done to make Apple’s streaming music service better than the others:

  • It should be easy to find music, by artist name, song name, album name, etc. This currently isn’t the case with Spotify; they’re search isn’t very good (I’m not familiar enough with other streaming services, because there aren’t many available in the UK). iTunes searches are good enough: you can search by album, artist, song, etc., and, in general, you find what you want, even if it’s somewhat obscure. This also means that classical music should be easy to find. In general, the iTunes Store’s metadata is pretty good, but it often gets artists wrong, or has incomplete lists of artists, for classical music.
  • You should be able to play an entire album with a single click or tap.
  • You should be able to access a full history of what you have listened to. Spotify has a Play Queue – a sort of “Up Next” – and there’s a History tab, which should show everything I’ve listened to. I haven’t used Spotify in a while, and the History tab only contains what I’ve listened to on my computer. If I look on my other Mac, nothing shows up; nothing is listed from what I’ve listened to on mobile devices. This Recently Played playlist should contain everything I’ve listened to with my account, from every device, and should be available on every device as well.
  • You should be able to rate music, not just “star” it, using a five-point scale, as you can do in your iTunes library. You should be able to record what you like and what you don’t, because if you listen to a lot of music, it’s hard to remember.
  • If iTunes becomes a streaming service, you should be able to stream any music from the iTunes Store (as long as labels have opted in). It should be transparent as to what you can and can’t stream, and streaming should be as easy as buying.
  • You should be able to add streaming tracks to your iTunes library. This is the killer feature. Just as you can have tracks “in the cloud” in your iTunes library, and use them as part of a playlist, you should be able to do the same with streaming tracks. They should become part of your library, combined with your purchased music, and you should be able to play them as if they were in your library.
  • iTunes should cache what you listen to, so it doesn’t have to keep re-downloading the same tracks; so, rather than streaming each time, it would store tracks – in encrypted form – in a cache.
  • You should be able to sync streaming tracks to your iOS device, either via iTunes Match or by a connected sync. In other words, the difference between what you physically own and what you stream should disappear. iTunes should be able to sync cached files or download streaming tracks for offline playing, so you can sync them to an iPhone and listen to them without worrying about paying for mobile data. (You should have the choice as to whether you want to sync actual tracks or just pointers, to later grab them on your iOS device.)

What I’m suggesting, in essence, is that the wall between your music library and the entire iTunes Store library be torn down, for a fee. Apple is the only company that can do this, because of the integration of the iTunes Store and the iTunes app, and its ability to sync content to mobile devices. If Apple were to do this, they would have literally no competitors, at least on iOS devices.

Here’s how you might see it in iTunes. Some tracks are local, others in the cloud, others are tracks you’ve added to stream. The icons in the cloud column show their locations:

Apple streaming music

However, if this is the case, who would buy music? I would still buy some CDs, because I want to own music, but I can’t imagine that I’d buy any more digital music. This is the problem with streaming services: if they’re too good, they will cannibalize sales. However, streaming done right could cannibalize piracy as well.

And there, as they say, is the rub. If you make streaming too good, no one will buy music any more. If streaming is mediocre, not enough people will pay for it. If streaming is going to generate enough income to keep musicians and record labels afloat, maybe it’s time to make a big leap into the unknown. Right now, only Apple can do this.

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.

Why Tidal Doesn’t Matter

Yesterday, musician Jay-Z and a number of other millionaire musicians announced the (re)launch of Tidal, a streaming music service. It had initially gained some small amount of traction in the audiophile market as a lossless music streaming service (under the name WiMP), notably with a good selection of classical music, before being purchased by Mr. Z. While it still offers lossless streaming – in a more expensive plan – the basic Tidal offers 25 million tracks for the standard price of $10 a month. What sets it apart is the fact that it is the fact that the majority of the company is owned by artists.

This ownership means nothing, though, in the broader scheme of things. Unless these musicians – and there are some big names, including Rihanna, Kanye West, Madonna, Nicki Minaj, Jack White, Alicia Keys, Daft Punk, and Beyoncé – have become Marxists, the company won’t pay out much more to artists than other streaming services. Even if they can increase royalties by 50% – which probably isn’t difficult, given the low royalties paid to artists by other streaming services – that won’t help fledgling artists very much. What it will do, however, is help continue to line the pockets of the artists who do sell lots of music. I find it suspicious that when launching a streaming service that is supposed to be fair to artists, they’re unable to say what they’ll be paying.

Mr. Z – whose real name is Shawn Carter – seems to have a flimsy grasp of economics. He is quoted by the New York Times as saying, “Water is free. Music is $6 but no one wants to pay for music. You should drink free water from the tap — it’s a beautiful thing. And if you want to hear the most beautiful song, then support the artist.”

Perhaps Mr. Z doesn’t realize that most people pay for water; perhaps that is not the case for him. But comparing music to water shows that his liquid-based business model needs a bit more fleshing out. Also, what music costs $6? An album? A download? Most CDs cost more than that, as do most albums sold as downloads. Mr. Z’s albums are certainly not $6 each.

I wholeheartedly agree that artists need to be paid more fairly, and that streaming music services are just another way for record labels to exploit artists. But there’s no way that Tidal will change that, at least not unless these millionaire co-owners – who, according to the New York Times, have not invested their own liquidity in the company, but have been “granted shares in exchange for their good-faith efforts to supply exclusive content” – are prepared to not take profits in order for smaller artists to be able to afford to pay their water bills.

Mr. Z is also quoted as saying: “I just want to be an alternative. They don’t have to lose for me to win.” Actually, they do. Because very few people subscribe to more than one paid streaming service. So the only way for Tidal to win is for them to attract users from other services. It’ll be a tough slog.

Major Labels Realize that Free Music Is not Sustainable

The free model of music streaming, where listeners “compensate” record labels and artists through advertising, is increasingly coming under criticism. A Rolling Stone article explains how major labels have decided that “We need to limit free.”

As music streaming revenue has exceeded that of recorded music sales for the first time, record labels are realizing that giving away their content for free – even if it is compensated by ads – isn’t viable. Ad-supported streaming is a small part of the overall streaming income, at around $295 million, in 2014, compared to nearly $2 billion generated by streaming overall, but the vast majority of people still listen to music without subscriptions. For Spotify, some 20% of users have paid subscriptions, while 80% listen to free.

If you do the math, based on the above numbers, that suggests – just back-of-the-envelope calculations – that paid subscribers inject some 30 times as much revenue into the music economy, per person, than freeloaders. It’s obvious that this cannot last. Just as free content is killing newspapers and magazines, free music is draining income from the music industry.

As the Rolling Stone article points out:

“At least one of the three major labels is in the process of renegotiating its contract with Spotify this year, sources say, and most are pushing for this sort of change to the free service.”

Apple is rumored to be planning to only offer a subscription model for their music streaming service, likely to be launched this year, and based on Beats Music.

Rdio’s CEO, Anthony Bay, told Rolling Stone:

“The view is, ‘Piracy is bad, so legal “giving away for free” is better. But as you see more and more, a lot of managers, artists and executives are saying, ‘Maybe free was too good.'”

Apple’s Music Streaming Secret Weapon: Genius

I was out taking a walk this afternoon. I had my iPhone, and my headphones, and I was listening to music. When I do this, I listen to music in different ways, depending on my mood. Sometimes I pick an album and listen to it in order. Sometimes I shuffle all my songs. And sometimes, like today, I shuffle songs until I find one I like, then I create a Genius playlist from it and listen to that.

Apple’s Genius examines the music in your iTunes library and compares it with the libraries of others to create playlists of “songs that sound great together.” Essentially, Genius looks to see what you have in common with other music listeners, and crunches numbers to find the songs that will work in a playlist based on what different people have in common.

This is very different from iTunes Radio, or any algorithmically-based streaming radio, which tries to find songs that go together, sort of. It’s based on a lowest common denominator approach, trying to find bands that are similar to other bands, albums that work with a certain genre, and package them in a radio-like stream. But if you’ve listened to iTunes Radio, to stations other than those that play hits, you’ve probably been disappointed. You either hear the same songs over and over, or you hear lots of songs that you don’t like. Since you can only skip six songs per hour, per station, you’re likely to not find iTunes Radio very interesting.

If Apple makes its iTunes streaming service as I think they will, you’ll have access to every song in the iTunes Store – which is the way other streaming services work – but you’ll also have access to your own music library. The two will be commingled, and you’ll be able to create playlists using music you own together with music you stream. If so, iTunes will be able to leverage the Genius database – information about the music you already have in your library – to create much more efficient playlists and radio stations than what’s available now.

Apple’s Genius technology works quite well. I often use Genius Shuffle at home when I don’t know what to listen to, and I use Genius playlists when I’m out walking, as I described above. Naturally, I only hear music that I own, but the combinations are appropriate. If Apple can leverage this technology in it music streaming service, they may have the most personal of all streaming services, giving them a big edge in the market.

What’s Lost When the Cloud Replaces CDs

“Recently, while moving my CD collection to new shelving, I struggled with feelings of obsolescence and futility. Why bother with space-devouring, planet-harming plastic objects when so much music can be had at the touch of a trackpad–on Spotify, Pandora, Beats Music, and other streaming services that rain sonic data from the virtual entity known as the Cloud? What is the point of having amassed, say, the complete symphonies of the Estonian composer Eduard Tubin (1905-82) when all eleven of them pop up on Spotify, albeit in random order? (When I searched for “Tubin” on the service, I was offered two movements of his Fourth Symphony, with the others appearing far down a list.) The tide has turned against the collector of recordings, not to mention the collector of books: what was once known as building a library is now considered hoarding. One is expected to banish all clutter and consume culture in a gleaming, empty room.”

Alex Ross ruminates, at The New Yorker, about what’s lost when we no longer buy physical music. His conclusion:

“But only by buying the albums are you likely to help the label stay in business.”

via What’s Lost When the Cloud Replaces CDs.