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Apple Music – The New Kid on the Block

by Christopher Smith , 17.08.2015

Rumors were finally put to rest in June when Apple announced and released the much talked-about Apple Music. One month later, after a typically bold and hyperbolic keynote introduction of the latest addition to Tim Cook’s tech stables, questions remain about whether the service will be a success.

When Apple bought Beats back in August 2014 for a cool $3billion, everyone with a slight interest in the tech giant began speculating as to what their next big move would be. The wait is over. Just under a year after the acquisition, we have our answer. Apple Music was delivered to the world on 30 June 2015, available to anyone with an Apple product and up-to-date OS (note: Apple Music will be available on Android platforms later this year).

Initial reviews of the service have been mixed. The key reason for this though, is that perhaps this isn’t really a “revolutionary streaming music service” (Apple’s own words). This isn’t what the iPod was to MP3 players. It certainly isn’t what the iPhone was to the mobile phone market. No. But I don’t think Apple genuinely thought they would be able to heavily disrupt the market with this service. Even though permanent downloads still represent 52% of global digital music revenues, 23% are now also made up from subscription-stream income. Continued growth in this area has simply forced Apple to adapt their strategy in order to keep on par with changing purchase and consumption habits; in the long term, perhaps simply to maintain profitability in this branch of the business.

Way back when, Apple was one of the only tech companies people associated with the music industry. However, as we have seen falls in music sales through the iTunes store, similarly, we have also seen a decrease in relevance of Apple in this particular sector. Streaming pioneers like Pandora and Spotify are the ‘it crowd’ within the music world now. For the first time in a long while, we are watching Apple play catch up in a race, rather seeing them start with the gold medal already around their necks. The question is whether the service is as good as the hype (and Apple, one must admit, are awesome at creating a buzz around their products).

Apple Music is also hoping to court subscribers with exclusive content. However, Tidal also used this familiar gimmick, only to see their hopes of immediate success washed away when their app fell out of the App Store top 100. The question is whether they’ll be able to stop a mass exodus from the service after the complimentary 3 month trial periods expire.

Spotify, like many other streaming services, provide a ‘free’ version of their product to consumers, albeit supported by ads (which most people will be keen to point out is the ‘cost’). For Spotify, this free version of the service has been a strong pull factor, helping them to build up a healthy user base that boasts over 75 million active users (20 million of whom have decided it’s worth spending 9.99 of their local currency on the subscription few each month). Not half bad for a company that was only launched 7 years ago. Entering a market with such a strong leader can be risky, especially given that this incumbent is already available in 58 markets around the world and has over 30 million songs in its artillery. However, was it blind faith that led Apple to enter this market?

A few years ago, BT made a similar move into the Sky Sports dominated world of Premier League football. BT, traditionally associated with telephones, had hitherto little history in the world of sports broadcasting. Crucially though, they were already an established brand (albeit in telecoms and Internet services) with a massive reach in the UK. In a similar fashion to Apple Music, they too hooked consumers onto their service with a generous freebie, offering football gratis to any BT Broadband customers. Since it’s launch in 2012, BT Sport has been a tour de force and is now securing more rights to top-flight football matches, most recently winning contracts to show Champions League football next season.

BT took everyone by surprise shook up this developed market. It’s arguable that there was less competition here, but Sky are one of the most powerful media companies in the business, so one thing this case certainly proves, is that Apple has a good chance of successfully disrupting the music streaming market. Like BT is to the UK, Apple is one of the World’s most recognized brands. Unlike BT however, they have a truly global reach due to the popularity of the Apple product line. These two factors, as well as already having an understanding of and history working within the industry they’re entering, will be crucial in the success of Apple Music.

For more information contact Christopher Smith at christopher.smith@gfk.com.