Apple's new music streaming service is on the way and it's going to change ITunes.
Called 'Apple Music' it will compete with the likes of Spotify, Deezer and Pandora and will be all encompassing (radio and downloading including) probably costing about 10 USD a month and be pre-installed in the next generation of iphones (giving it instant market distribution).
Plus Apple's extraordinary cash reserves, will give it the marketing edge on competitors simply by outspending them (Spotify has 15 million subscribers - the market is circa 40 million subscribers currently).
Unlike Spotify, Apple Music will not have a free tier so either you're in or you're not but they're likely to bundle some free months are part of a signing up offer.
Streaming may of course, hamper the declining download market which in turn, will impact on the general music business. But Streaming has shown significant growth - it's what consumers want vis-a-vis downloading.
All coming in an announcement today.
But it's a big change for the way in which Apple are attacking music.
And a big change for artists too.
For the first time since Apple opened its Itunes music store in 2003, US digital music sales have fallen last year. Interesting data from the reputable Financial Times.
Why?
They've dropped by about -6%, and downloads account for about 70% of that market (which shows you how much record shops have suffered) to well over a billion units. Of which Apple now controls about 70%.
The reason why is streaming - music rental.
Itunes Radio is one reason where people hear songs in a radio playlist supported by advertising. So if they switch to Itunes Radio, they are less likely to buy from ITunes.
Might be a case of shooting yourself in the foot? We will see.
Spotify also people to choose the songs they want to hear for a monthly fee. Deezer similarly.
Monthly fees might stabilise the market but it will defeat downloads. I don't necessarily need to buy the song, just listen to it.
But artists and music company revenue is worse in monthly streaming.... generating licence fees of circa 7,000 usd which is equivalent to about 12,000 bought downloads. Only. Beyonce's latest album had about 830,000 downloads in three days.
And of course, there's the monthly free streaming options out there which don't generate hard core revenue but rather a share in advertising. Worse again if you're a record label.
It's a sea change in the manner in which music is distributed and hence the impact on downloads. Will people want to just rent an album rather than buy it? If they do, there's a long hard road ahead.
However, it's hard to feel sorry for record labels. They spent years fighting it instead of embracing it and now find themselves dictated to by the market.
For once.
Google really seem to have their heads up especially with the oncoming onslaught of glasses and their move into retail. It's almost like there's a new energy a Google, a new momentum?
According to the front page of this weekend's Financial Times, they're about to launch a music streaming service and The FT know because of the discussions taking place with big music labels. It will therefore compete with Deezer and Spotify.
Although there's an irony here because music labels didn't like google as they saw Search engines facilitating, music piracy.
Advertising accounts for about 95% of google's revenue so these type of services (and glasses) changes their revenue model to being based more on consumer income. No bad thing.
Music streaming normally allows two price options - free, but be subject to advertising or, pay, and get premium music, ad-free service. With download you get to keep the tract and this "streaming" market is worth over 1.5 billion usd a year....at the moment.
Commercial music download concepts (like Apple's itunes) is different to streaming and Google already launched a US music download store in late 2011. They also have YouTube plans for subscription music services and others (such as travel, price comparisons and so on).
Google can easily bring these services to the Nexus tablets and their Android phones (as Apple do with Itunes on iPhone). By scrutinising consumer habits and downloads, Advertising Agencies might be well prepared to get involved with this. It could be a valuable database.
But this will give Google another string to its bow. It seems a sleeping giant is awakening....and when it does, we will feel the roar.
