Apple’s streaming service marks a sea change in music

Nova Safo Jun 5, 2015

Apple’s streaming service marks a sea change in music

Nova Safo Jun 5, 2015

Apple is expected to announce its long-rumored streaming music service next week during its developers’ conference in San Francisco.

The service has been anticipated ever since the tech giant bought Beats, the headphone and streaming music company, last year. It is expected to cost about $10 a month, and include radio-like music channels with DJ hosts.

Apple will enter into a crowded field with established players such as Spotify and Pandora, which command the most music streaming plays.

The company is taking on that challenge as music consumption shifts from downloaded, and bought, mp3 tracks to streamed music that is either made available free through ad-supported networks or through a monthly subscription.

In May, Warner Music Group, one of the three biggest music license holders, said that streaming music revenue in the last quarter surpassed revenue from downloads for the first time, growing 33 percent.

Younger audiences, such as 20-year-old Sylvie Grace, a musician from Chicago, are increasingly streaming rather than downloading.

“I used to [download],” Grace says, “when my mom was paying … but I haven’t bought something online in a long time.”

Twenty-year-old Michelle Chan, who was visiting the Apple store in downtown Chicago on a recent afternoon, says she streams music for free on Spotify, as much for the convenience as for the price.

“They have playlists all set, so you don’t have to look for music. And you can type in whatever you want,” Chan says, adding that she does occasionally pay to download music, but only when it is not available on Spotify.

“The trend right now is pretty clearly that streaming is growing by leaps and bounds,” says David Bakula of the entertainment tracking firm Nielsen.

Single track sales of mp3s on iTunes and elsewhere are down about 10 percent so far this year, Bakula says, while the volume of on-demand streams, in which Apple has little presence, has almost doubled to more than 110 billion in the first five months of this year.

“We found that two-thirds of people are streaming music on a weekly basis,” Bakula says, “It’s really permeating every demographic of society.”

This massive audience is fragmented among a number of disparate music services: Spotify, where they can play specific songs on demand; Pandora, which plays music in channels that incorporate algorithms, human input and listener feedback; YouTube and Vevo, which stream music videos; live streams of terrestrial radio stations with DJs, and other services.

Apple could entice that fragmented audience just by making music streaming easier on the iPhone, for example, by integrating into the phone’s native music app.

Colin Gillis, an analyst who tracks Apple at the brokerage firm BGC Partners, has been sounding caution about the tech giant’s reliance on the iPhone for profits, and says diversifying into other revenue streams and protecting their revenue from music are both important goals.

“They should have a streaming music service. They should have a streaming video service, a la Netflix,” Gillis says, adding that ancillary services are still likely to generate only a small fraction of Apple’s profits in the near future.

Clarification: A previous version of this story didn’t fully explain Pandora’s functionality. The text has been updated.

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