Apple's Plan to Kill Spotify and Own the Music Industry

A window into Cupertino's latest power grab

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In what could be a major power grab by Apple, The New York Post and others report that Apple is working on a subscription-based music service for $10 to $15 per month. Apple currently dominates downloadable music sales through its iTunes Store. Its entrance into music streaming could further strengthen its clout in an industry struggling to find a business model. Furthermore, the move seems to be in concert with efforts to prevent Spotify, a hugely popular European streaming service, from entering the North American market. As CNET reported Thursday, Apple is trying to convince music industry executives to blackball the free streaming service:

In meetings in Los Angeles recently, Apple executives told their music industry counterparts that they had serious doubts about whether Spotify's business model could ever generate significant revenues or profits, according to two sources with knowledge of the discussions... They noted that it's tough to sell something that someone else is giving away, the sources said. One industry insider said it is only logical that if Spotify were allowed to launch a free-music service here, at a time when Nielsen recently reported that the growth of digital sales has flattened out, it could eat into the businesses of proven revenue-producers.

If Apple goes through with its subscription services, how could this affect Spotify and the music industry in general?

  • Ultimately, Apple Wants to Block Out the Competition, writes Frederico Viticci at Mac Stories:
Apple wants to launch a music subscription service with cloud access and they don’t want Spotify to get in the way. They’ve probably been calling some labels to tell them about Steve’s “better, more secure” plans, and to remind them that, in the end, you can’t trust Europeans. That’s how they roll: Steve Jobs saved the music industry. Labels owe him one. Even though music downloads have slowed down over the last year, labels are ready to believe in Jobs’ plan once again...

When it comes to business it’s never about who’s wrong or right. Spotify is playing its own game (or maybe they’re learning how to play in a new field) and Apple wants to keep labels close, and competition far away from them. The music industry has always been a huge mess, and now that tech companies have joined the mess it has become an even more complicated affair.

  • Spotify Could Still Break Through, writes Darrell Etherington at Gigaom: "If Spotify is willing to pay big royalties for content up front, chances are music labels will allow them entry into the market. Rumors are circulating that Spotify will be part of Windows Phone 7 launch coming early next week. If it does come that soon, though, it’ll probably only offer a limited catalogue."
  • Record Labels Want Spotify to Charge Users, explains Jason Ankeny at Fierce Mobile Content: "While the majority of Spotify users tune in to a free, ad-supported version of the service, BusinessWeek reported in mid-June that the four majors--Universal Music Group, Warner Music Group, Sony Music Entertainment and EMI Music--want Spotify to follow the lead of rivals like Rhapsody and eMusic by introducing premium monthly subscriptions to U.S. consumers, enabling the music industry to share in resulting revenues."
  • This Could Kill Rhapsody writes David Zax at Fast Company: "Who stands to lose if Apple enters the subscription music market? Rhapsody, for one. The leading subscription service now offers streaming subscription plans for about $10 per month. With Apple's vast iTunes user base--200 million of them, according to one analyst and a $1 billion operation just to run--and its legions of customers who are used to paying for music in its iTunes store, an Apple subscription service could push Rhapsody to the margins. (We've reached out to Rhapsody to learn their reaction to the reports, and will update if we hear back.)"
  • Pricing Will Be Key, writes Jacqui Cheng at Ars Technica writes: "The number being tossed around is $10 to $15 per month for the streaming subscription, though a number of details are still left in the air, such as how much music users would be able to access in a month, and for how long. If Apple followed the same model as other subscription services out there, the answers to those questions would be 'unlimited' and "until the subscription is canceled." There's no guarantee it will play out that way, though, as Apple likes to do its own thing."
This article is from the archive of our partner The Wire.