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 Apple Music, unveiled Monday and scheduled to launch at the
end of the month, will offer subscribers access to a vast
library of songs for $10 a month, but has no free on-demand tier
unlike industry leader Spotify and others.
Officials in the recording industry are pleased to see Apple
throwing its deep pockets and strong brand behind paid
streaming, which generally provides more revenue for labels than
the free services, which are supported by ads, said Cary
Sherman, chairman and chief executive officer of the Recording
Industry Association of America.
"We are very hopeful that Apple will not only succeed but that
Apple's entry into the streaming business in a major way will
actually be a shot in the arm for all streaming services," he
said, helping them - and the record companies - make more money.
The trend toward streaming is clear: Paid subscriptions in the
U.S. rose 26 percent year-over-year to 7.7 million in 2014,
according to data from the RIAA.
But despite the generally positive reaction to Apple's
announcement, some music companies are still concerned because
of the tough economics of the streaming business, said Sherman.
Premium subscriptions offer slightly better payouts to record
labels and their artists than free services, but not as much as
digital downloads.
Spotify's premium service, for example, generated revenue of
less than $37 million in the United States in December 2014,
according to an analysis conducted by Audiam, a New York-based
firm that helps music companies collect digital royalties.
But Apple's sheer volume of existing users - roughly 800 million
accounts on iTunes - could significantly increase the payoff for
publishers, said Jeff Price, the CEO and founder of Audiam.
"Those numbers are staggering in comparison to anything that's
existed in the market place," said Price. Spotify has more than
20 million paid subscribers worldwide, company spokesman Graham
James said.
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If Apple is successful, said Ted Cohen, a former music executive,
others in the industry may decide to weaken or phase out their free
tiers, he added.
"If you get people exposed to the convenience and the ease, then
they will believe it's something worth paying for," said Cohen, who
is now managing partner of TAG Strategic, a digital entertainment
consultancy.
The New York Times reported Tuesday that attorneys general in New
York and Connecticut are looking into whether Apple may be taking
steps to slow the rise of free streaming services. They are
investigating whether Apple worked with the record labels - or
pressured them - to stop supporting so-called "freemium" services
like Spotify. Such services have a free, ad-supported tier and a
paid tier.
As Apple prepares to release its service, rivals in the streaming
business remain confident.
Rob Glaser, co-chairman of music streaming company Rhapsody, said he
saw few features in Apple Music that set it apart from the pack.
"Apple Music is more of a me-too product than a breakthrough
product," he said.
And Apple's splashy entrance may well benefit all streaming
companies, said Steve Boom, vice president of Digital Music at
Amazon. The company offers its Prime subscribers free access to
songs and playlists through Prime Music.
But even with Apple's push, success is not guaranteed. "Consumers
still have to ask the next question, 'Now I'm aware of it, am I
ready to spend $10 a month on it?'"
(Reporting by Julia Love and Mari Saito in San Francisco; Editing by
Stephen R. Trousdale, Sue Horton)
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