Why Apple’s New Music Service Will Crush Spotify
Companies / Apple Jun 11, 2015 - 05:12 PM GMTBy: Investment_U
Alexander Moschina writes: I love music. I sit at my desk with earbuds in all day (for my coworkers’ sake). Which is why most professional conversations typically begin with “Sorry, what?” or “Wait, I didn’t catch that...”
That said, I haven’t bought a physical album since 2012.
It’s not that I don’t appreciate liner notes... artwork... or higher-quality audio. I just prefer the convenience of having the world’s music at my fingertips - at all times - via streaming services like Spotify and Pandora (NYSE: P).
Clearly I’m not the only one. At the beginning of 2015, these two companies reported having a combined 1.3 billion subscribers.
According to a recent survey, 61% of adults aged 25-54 stream music online. For younger respondents, aged 12-24, the number is higher... a whopping 77%.
What we’re looking at here is an already huge - and growing - market.
So it came as no surprise yesterday when Apple (Nasdaq: AAPL) announced that it was throwing its hat into the streaming ring. It didn’t spare any fanfare, either...
The company enlisted the help of record producer Jimmy Iovine and rap star Drake to unveil Apple Music. For $9.99/mo - comparable to Spotify’s premium subscription level - users can stream any song or album in the iTunes music store.
In addition, subscribers will have access to Beats 1, a 24-hour online radio station... and Apple Music Connect, a platform that allows artists to share notes, photos and videos with fans. Apple spent a good half hour of yesterday’s presentation covering these two features.
But the real draw of Apple Music is simple...
Anyone who subscribes will have instant access to the more than 43 million songs available on iTunes.
You see, Apple may not be the first to the party... but its catalog is, without question, the largest. To compare, Spotify boasts just over 30 million available tracks. Rdio, another streaming site, offers roughly the same amount.
Another advantage for Apple? Thirty-eight percent of U.S. smartphone users own iPhones. In Japan, the company owns nearly half of the smartphone market. In England, the number is 38.6%. And in China, Apple grew its market share from 18.1% in November to 27.6% in February (as access to 4G wireless networks continues to grow across this country, so should iPhone sales).
Here’s why this is important: After a software update later this month, all of those hundreds of millions of devices will be loaded with Apple Music. If you’re holding an iPhone on June 30, you can expect a notification encouraging you to activate your free three-month trial.
And Apple isn’t stopping there...
In a bid for total dominance, the company has announced it will release Apple Music for Android, Google’s (Nasdaq: GOOG) operating system, later this fall.
Google is the undisputed market leader in smartphones. During the fourth quarter, consumers bought 289.1 million Android devices.
The company also has its own premium music service, Google Play Music. Just like Spotify, it offers users unlimited access to “over 30 million songs” for $9.99/mo.
Again, herein lies the opportunity for Apple. It can swoop in and sway Android users with more music... and more integrated features... for the same amount of money.
That’s a rare move for Apple, which has a reputation for producing elegant but expensive tech. With its competitive pricing, the company is making an aggressive push into the streaming marketplace.
Will Apple Music be a hit? We'll find out in a few weeks.
(Disclosure: The author is an Apple shareholder.)
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