Technology

Boom in Music Streaming

No wonder music streaming business is booming with all giant companies having stakes in it.  Apple, Amazon and Alphabet ? the biggest players in music streaming ? do not actually consider streaming as a their primary business. These companies are surviving in this high-cost business as it isn?t their only source of revenue.  All these three companies are conglomerates, and they use high revenue and profit from one business to offset costs in other. Obviously, their interest in  music streaming is to capture additional consumers to their overall business, thereby boosting sales in their non-music businesses.

While the streaming industry is still in boom, companies are pursuing different strategies to have a dominant positon in the industry.  While Apple still continues to invest in Apple Music with more exclusive content than other companies, there are rumors that it is exploring acquisition of its smaller rival Tidal.  Apple Music, which is just about a year old, is used by Apple extensively to increase its sales of iPhones and other Apple devices. The new beta version iOS10 has an easy-to-use version of Apple Music giving Apple an upper hand on the user-interface.

Meanwhile, Amazon is getting ready to introduce a $10-a-month music service subscription; this is very similar to Apple Music and Alphabet subscription plans.  The tech companies idea of paid music streaming services is not just a new revenue stream ? it is used as temptation to attracting customers, keep them connected to the device for a longer time, and sell them something else.  Amazon is aiming to launch the service in the coming month ? while it is marketing the subscription as a music service it will complement this service with other products such as its successful Echo loudspeaker and also encourage its customers to shop on its website.  While Amazon currently has Prime Music for its Prime members, it didn?t have the latest albums and wasn?t able to compete effectively with Apple and Alphabet, which may also be the reason why it is launching this new subscription service.

Alphabet, with its YouTube Red and Google Play Music, is offering ad-free music to its consumers.  Such intra-company ?deals? have been successful for Alphabet and the company reported increasing revenue on YouTube Red over the last few months.

Streaming music has definitely advanced other products and businesses of Apple, Amazon and Alphabet. This gives them a major advantage over small companies like Pandora, Spotify, and the French company Deezer ? all of which have only music streaming as their business.  Since all these companies ? both big and small ? have to pay 70% of their music revenue on acquiring licensing music and the rest on other costs, they have very low profits and in some cases report a loss too.  Thus, big companies stand to benefit as they have additional and complimentary offerings that will offset the costs of their music business.

Since Apple and Alphabet also support apps of their smaller rivals such as Spotify on their platforms, sometimes it leads to conflicting situations.  Recently, Apple rejected an update to Spotify?s app that didn?t agree with Apple?s guidelines. This led to some spat between Spotify and Apple, and Spotify?s attorney called Apple?s move anticompetitive.

Independent streaming services such as Spotify and Pandora are vital to drive innovation in the market but face tough competition from the established companies such as Apple, Amazon and Alphabet when it comes to making profits.  In addition, they have to unwillingly partner with these companies to get their apps on the platforms such as iOS and Android.  This puts them on a rough path, yet they seem to grow in some way or the other.  While the music lovers tend to be confused with what to try and buy, the variety of choices for them only makes it easy for them to listen to the latest albums.



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