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Apple May Unleash a Spotify Killer

If the rumors are true, music startups have plenty to worry about.
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You might think that adding a free, ad-supported radio service would be enough for the tech company that has sold 25 billion songs on iTunes. But now Apple reportedly is in talks with senior label executives to launch an additional on-demand service that would not only rival Spotify and Beats Music, but stem the recent drop-off in downloads. 

Citing Nielsen SoundScan, Billboard reports that U.S. digital album sales are down 13 percent for the week ending March 16, while digital track sales fell 11 percent over that period. One could argue the decline is a byproduct of music streaming services' rise in popularity, but Billboard believes it's more of a reaction to Google, whose Android operating system continues to gain market share.

From offering exclusives with hard-to-get artists such as The Beatles to pre-loading its streaming service on every iOS device, there are many ways Apple could come out on top. Apple could undercut Spotify's $10-per-month subscription fee, perhaps following venture capitalist David Pakman's advice of charging between $3 and $4, or what he calls the sweet spot for mainstream music fans paying for a subscription. 

Apple could also defeat Beats at its own game by doing more with music discovery--a big catchphrase right now--by souping up its Genius system, which offers iTunes users recommendations based on their recent purchases, and perhaps snapping up a startup or two to help with the effort. 

If there's one retailer on the planet who knows what consumers are willing to spend on digital music, it's Apple, Pakman says. But it's hard to imagine startups being able to survive on lower subscription fees. If it's true that consumers prefer to pay around $48 a year for their music, as Pakman argues, then the services charging twice that amount (roughly $8 to $10 a month) have their work cut out for them. 

 

Pandora's Tim Westergren: 'Simply Put, Our Listeners Saved the Company'

Tim Westergren tells how loyal Pandora customers became a spontaneous grassroots lobbying force in 2007, when a federal panel doubled the royalty rates the company had to pay music labels.

Last updated: Mar 25, 2014

JILL KRASNY | Staff Writer

Jill Krasny is a staff writer for Inc. magazine, where she covers the intersection of entertainment and startups. Prior to Inc., she was a writer for MTV and Esquire and an editor at TheStreet. She is a graduate of the University of Southern California with a degree in communication. She lives in New York City.




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