With Apple being the latest contender to launch a music streaming service, CMC Markets Market Analyst Jasper Lawler assesses what this could mean for the entertainment industry.
Within the report Jasper covers:
• How Apple's iPhone gives it an edge over streaming competitors such as Spotify
• The rise of other contenders offering subscription music streaming services
• How Apple and Amazon can integrate TV with music streaming services to provide a unique USP to consumers
• What the future of streaming services could mean for consumers and the entertainment industry
Apple's launch of its own music streaming service is a big moment for the future of the music industry, and especially the subscription content streaming industry.
Apple will be aiming to dethrone Spotify as the largest music streaming business. Spotify has 75m active users, 20m of which are paying subscribers. Spotify's growth is impressive and its eventual IPO should prompt a surge of interest.
The problem for Spotify is that Apple has sold around 500m iPhones to date. All iPhones run on the iOS operating system which is likely soon to include Apple Music as a default app, giving Apple a head start on future streaming customers. This is akin to Microsoft bundling Internet Explorer on its Microsoft operating system or Google putting its own products at the top of its search results. These actions attracted the attention of European regulators, so there may be a few bumps in the road for Apple's streaming success.
The main players in the subscription music streaming business are Spotify, Rdio, Rhapsody, Pandora, Deezer and Tidal. Rapidly snapping at their heels are established tech industry players in the form of Google Play, Amazon Prime Music and Xbox Music and now Apple Music.
Apple did not initiate the encroachment of 'Big Tech' into music streaming, but it will definitely accelerate returns. There are many more Android devices out there than iPhones and Google is another major threat to incumbents like Spotify. Not only do Apple and Google have massive existing customer bases to cross sell into, but they have very deep pockets and can easily run streaming as a loss leader to gain market share. Spotify is yet to turn a profit.
Amazon Prime might be the best template for where the entertainment industry is headed. Hollywood and the music business all under one roof. As streaming becomes more popular, it makes sense that customers will want music and video services under one roof. Apple can use its Apple TV device to further integrate TV with music streaming.
In order to compete with Apple and Google, the likes of Spotify and Rdio may have to join forces with Netflix. Else, other big players in tech may want to join the bandwagon, it's not unheard of for Facebook to pay large valuations for start-ups with a growing user base and no profit. Yahoo! and Microsoft are possible acquirers with big cash piles who are trying to stay relevant in the mobile world.