Apple and the music business The second revolution.
Apple, having already transformed the music business once, is trying to do so again.
WHEN Apple bought Beats, best known for making bright-coloured headphones, for around $3 billion last year, many wondered what the technology giant had in mind. They now have their answer. On June 8th, Apple held its annual gathering for software developers in San Francisco, where it revealed a new music-streaming service, based on one it had acquired as part of Beats. Tim Cook, Apple’s boss, elected not to do a soft sell. “It will change the way you experience music forever,” he promised. “Revolutionary” is how several others described it on stage.
The new service, called Apple Music, is based on Beats’, but takes it a few steps beyond. It will be available at the end of June for Apple users, and later this year on Android, Google’s operating system for mobiles. In exchange for a monthly fee of $9.99, people will have access to an unlimited number of songs, which they “rent” instead of own. As predicted, the service pivots Apple’s music offering away from digital downloads, which it helped popularise with the launch of the iPod music player in 2001. This trend is mirrored by the music industry as a whole. Streaming revenues have been rising while downloads have declined in recent years (see chart).
However, unlike with the launch of its iPod, Apple did not lead this musical revolution. Instead, it is pushing into space occupied by other firms. The most obvious encroachment is onto the turf of on-demand streaming services, including Spotify, which has 15m paying subscribers globally. Apple Music will attempt to differentiate itself from incumbents by having better curated playlists that are hand-selected by people, not algorithms. Apple is also trying to make finding new music easier. Eddy Cue, an Apple executive, demonstrated how a user could verbally ask her iPhone what song was played in the film “Selma” and have John Legend singing the theme tune within a few seconds. Apple Music is also marching into the territory of SoundCloud, a firm that makes it easy for freelance musicians to upload their works to the internet, where they can be found by people looking to discover new artists.
Apple is taking on other giants, too. It was impossible not to think of YouTube, Google’s online video service, when Mr Cue showed how easy it was to watch music videos through Apple’s new service. Apple will also take on traditional and internet radio. “Beats One” is a new global, 24-hour online radio station, which will be accessible via the service. This station of curated music will probably appeal mostly to music listeners who do not want the hassle of trying to decide what to listen to. It has the potential to influence musical taste globally, if it builds up enough listeners.
Apple’s big announcement raises two questions. The first is whether the service is truly revolutionary. The answer is that Apple Music draws together many familiar and existing elements of other music services into one convenient offering, rather than any new features in their own right. For record labels and musicians, the service will not improve their fortunes dramatically. Digital downloads are more lucrative than streams. Apple is likely to simply convert people who used to pay for downloads into streamers, rather than increase the population of those paying for music.
The second question is whether people are likely to pay for what Apple is peddling. Apple has an estimated 800m credit cards on file as of 2014 and a legion of committed enthusiasts who prefer Apple’s user interfaces and devices. It is not hard to imagine how Apple could soon dwarf Spotify’s 15m paid subscribers, once people sign up for the free three months that the firm is offering and grow accustomed to using the service.
For Apple the biggest difference between 2001, when it launched its iPod, and now is that the success of this music “revolution” will not determine the fate of the firm. When it first released its iPod Apple was a computer company with big ambitions. In 2015 Apple is the most valuable company in the world. It is not only a technology company but a renowned luxury brand. In addition to its music offering, today Apple announced other features that are designed to keep customers within the firm’s ecosystem of products, which include a wallet and news-reading app. Apple Music, in other words, is just one small track in the firm’s much larger album.