Everything you need to know about why the Apple Brand may not be enough to move the needle for the Music Industry
Tomorrow, “it” happens. Apple’s long-awaited and much-hyped music service, Apple Music, will launch.
Along the way, we have had to endure near continuous use of the phrase “Move the Needle” from a music empresario (the same phrase used to describe a headphone company as well as a record label), negotiations via social media between a music empresaria and Apple, alongside an endless stream of “Apple Music, everything you need to know” articles (e.g., The Guardian, USA Today, Venture Beat, Wired, CNet, Mashable, The Week, Fortune, just to name a few).
Amidst all of the hype and hyperbole, there is some reason to wonder whether there may be three key consequences of the launch of Apple Music:
(1) A really big number of free trials. We could very well see numbers that map onto Spotify’s growth figures, as in tens of millions of free trials
(2) A measurable amount of churn among music services — or, at least among iOS devices. The question is whether the total market expands more dramatically than this inner churn.
(3) Some legal intrigue over the artist-generated and user-generated content on Connect — the sort of intrigue that will be a new experience for Apple.
The history of Apple Computer is, essentially, a 30+ year effort to perfect the art of hyperbole, with Job’s introduction of the Macintosh in January of 1984 setting expectations that remain through the decades. However, this time around there may be a few more gaps in the hyperbole, so we might as well as well address these gaps. And, we might as well just start out by stating the most obvious:
There is nothing truly “new” about Apple Music.
There, we said it. Nothing about Apple Music is truly “new.” Paid music services have been around since 2001/2, and since that beginning the gist and experience of music services has largely remained the same.
What has changed since 2001 is the presences and proliferation of smartphones, such as the iPhone, and the growth of the music service market, in part, tracks adoption of these mobile devices.
In 2015, however, very little distinguishes the proposed Apple Music service from those services by Rhapsody (the eldest), Rdio, Deezer, Spotify, Google Music, Tidal, and others. A great portion of this lack of variety is due to the context (and constraints) within which these services are licensed. Regardless, all services charge $9.99/month for the premium tier, all have (or will soon have) free trial periods, most can import playlists, many can match/store past music collections, all combined personalized radio with on-demand playback… we could continue.
The most striking feature that differentiates music services is whether the application has a white or a black background.
Will 800 million iTunes accounts spend more after spending less on music?
While Apple and other sources point to the market force that could be Apple’s 800,000,000 iTunes accounts, let’s just be frank: these accounts were already spending less music.
2014’s 8% decline in download sales, particularly singles sales, combined with a similar 8.1% fall in CD/physical sales, may be the cause of the music industry increased hope for (amidst still lurking fear of) music services.
However, the question of whether consumers see music services as a value proposition sufficiently compelling to treble (i.e., triple) household spending on recorded music is a big question, and has yet to be clearly answered.
Is family plan pricing enough of a “twist?”
If we were to be completely honest, the only twist unique to Apple Music, at least for the moment, is a $14.99 “family plan” tier that applies to up to six individuals — a twist that arrives by way of the Beats Music pricing via AT&T.
Across the other music services, such as Rdio and Spotify, additional family members are priced at $5 each, up to five accounts. In these schemes, a three-account family would cost $19.99 while a five-account family of five would cost $29.99.
There is some evidence out there that pricing matters when it comes to consumer adoption of music services (ahem). But, the music industry largely prefers to argue that the role of the service is to “sell” the fact that this on-demand access to music is a premium opportunity.
In reality, music service prices are falling. These prices drops simply occur through synthetic means — free trials and family plans.
Its unclear whether this family plan pricing will be seen as sufficient to shift music services from a premium niche to a mass-market opportunity. However, this pricing does present digerati families with a more compelling value proposition.
Can Free Trials convert Freemium Zombies?
While the industry prefers to pretend otherwise, the growth in paid music subscribers (particularly in the US, since 2011) lines up with the emergence of “freemium” offerings. However, the Apple Brand and a three-month trial may not be enough to suddenly convert the zombie accounts still walking the streets — those freemium accounts that went largely inactive after 90 days.
That last paragraph contains some controversy, so let’s use some data to justify the claim…
In the US of A, at least according to the RIAA, there were 1.3 million paid music service subscribers in 2005, 1.8 million 2007, 1.2 million in 2009, and 1.8 million in 2011. Suddenly, in 2012, there were 3.4 million subscribers and by 2014, 7.7 million subscribers.
Smartphone adoption was rising smoothly from 2007–2011, and the uptick in that adoption from 2011 to 2012 was really no different. Prior to 2011, most services had already dropped prices from $14.99 to $9.99.
What did happen in 2011 in the US? Freemium. Although, I guess you could say there is some evidence that simply being Swedish makes you more likely to subscribe to a music service.
Bigger market, or just more Churn?
In the near term, unless the Apple Brand has enough force to grow the market overall, all of the hype around Apple Music combined with the three-month free trial may lead to three things:
(1) A really big number of free trials. We could very well see numbers that map onto Spotify’s growth figures, as in tens of millions of free trials.
(2) A measurable amount of churn among music services — or, at least among iOS devices. The question is whether the total market expands more dramatically than this inner churn.
(3) Some legal intrigue over the artist-generated and user-generated content on Connect — the sort of intrigue that will be a new experience for Apple.
…More later.
Full disclosure: In honor of the launch of Apple Music I purchased a Nexus 6.
