Last year Apple paid a lot of money to buy Beats—the iconic headphones and streaming music company founded by rap mogul Dr. Dre and music industry veteran Jimmy Iovine. This year, it plans to try and cash in on that $3 billion investment with its own streaming music service, according to a report from 9to5Mac. Rival services, like Spotify, better brace for impact.
Spotify and other streaming music services probably weren’t all that concerned with Beats Music as a standalone competitor. Beats Music has only a fraction of the subscribers that Spotify has. Spotify recently passed 15 million paid subscribers—with another 45 million or so using the free service.
Beats Music is about to change the whole game, though. When Apple launches its rebranded Beats Music service, competing services like Rdio and Spotify could be crushed.
Apple has a secret ingredient that rival streaming music services like Spotify and Rdio lack: it’s Apple. Being Apple gives it three key advantages over the competition:
1. Apple Ecosystem
Apple has a massive base of loyal customers. There are millions upon millions of people around the world using Mac PCs, iPhone smartphones, and iPad tablets. Part of what those customers buy into is the simplicity of the Apple ecosystem.
Individuals can use Spotify, Pandora, or other services on their Mac or iOS devices, and many do. According to 9to5Mac, though, this new Apple service will be woven into the default Music app on iOS as well as the iTunes desktop software. That alone will be a significant advantage for Apple.
2. iTunes / iCloud Integration
One of the challenges faced by all of the streaming music services is the limitation of their catalog of music. Streaming services can only offer music from the labels and artists that have agreed to participate. Spotify recently lost a major artists when Taylor Swift pulled her music from the service.
The new Apple service will apparently seamlessly integrate the Beats streaming catalogue with the music users already have stored in their own iTunes libraries. 9to5Mac explains, “A new search feature will be able to locate any song in the iTunes/Beats catalog, and users will be able to stream music from the catalog as well as add songs to their personal libraries. Users will be able to select specific tracks to store on their iOS devices and/or computers, or keep all songs solely in the cloud.”
Merging the streaming music catalog with the local music library and enabling people to search and listen to it as a cohesive whole alleviates the problem of having a limited arsenal of artists signed up.
Apple reportedly plans to offer its rebranded Beats streaming music service for $7.99 per month. That undercuts Spotify, Rdio, and Google Play Music by $2 per month. Apple is sitting on nearly $200 billion in cash reserves, so it can afford to undercut other streaming music services indefinitely. Apple could also provide additional incentive by including iTunes Match with the streaming music subscription.
All else being equal, $2 a month is a significant savings. It represents a savings of 20 percent over other services.
When combined with the first two points, however, all else isn’t equal. Apple’s service isn’t just $2 cheaper. It’s $2 cheaper for a service that is seamlessly integrated with a user’s personal iTunes music library and available by default ubiquitously across the Apple ecosystem.
What about Pandora?
Pandora actually has far more users than Spotify. It has 250 million registered users and 76.5 million active users. It has fewer paying subscribers than Spotify, though, with an estimated three million Pandora One members.
The reason Pandora doesn’t really play into this equation it is that it offers a completely different kind of streaming music service. Pandora is an awesome service and a great way to discover new music you weren’t aware of, but you can’t just choose to listen to Michael Jackson’s Thriller album, or create a custom playlist of your favorite Tupac songs. Even paid Pandora One members are at Pandora’s mercy—they just get to skip songs more often and listen without commercials.
Pandora is more like a semi-customizable radio station you stream over the Internet, while Spotify and the impending Apple / Beats streaming music service are more like having the entire library of music at your disposal to choose to listen to how you like.
iTunes Radio competes with Pandora, but this new Apple / Beats service will compete with Spotify and other similar services.
The power of Apple
For evidence of the power of the Apple brand just look at Apple Pay. Other NFC and mobile payment systems have been around for years, but they never got any attention or gained any traction. Apple launched Apple Pay and suddenly millions of people are paying for things using their iPhones and retailers are scrambling to jump on board.
Yeah. The streaming music business is going to get disrupted in a big way.
This article was written by Tony Bradley from Forbes and was legally licensed through the NewsCred publisher network.