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By Oren Laurent
President, Banc De Binary
Love or hate her music, there’s no denying that Taylor Swift has given the music industry a good shaking up and won headlines by boldly rejecting Spotify. Given the growing popularity of the world’s largest subscription-based streaming service, Google and Apple are now also planning to compete and cash in. But will Swift’s claim that streaming fails to fairly compensate artists have a wider scale impact? Will she make the tech giants re-think their next steps? I’m not convinced. Her fans may see Swift as synonymous with modern pop culture, but the reality, as usual, is more complicated.
True, Swift’s stunt proved to be a winning move for the singer. She banked on the fact that legions of fans would pay for her latest album and she was right. Her new record “1989” generated around $12 mln in one week of sales, double the amount she was expected to receive from Spotify in one year. Yet, how many other artists are as big as Swift or as capable of making it on their own?
In the 21st century, we are a powerful group of consumers. Whether we’re at the computer or on the go, we enjoy access to a wide range of music, we appreciate exposure to new tracks, and we don’t necessarily want to pay for every individual song. The success of Spotify, with its 50 mln users, reveals the huge demand for streaming. The fact that 12.5 mln of those users pay a set fee for the advertisement-free Premium version proves to high-tech executives that they are right to enter the fray.
YouTube is owned by Google, and Apple has its iTunes store, meaning that both companies already benefit from a significant foothold in the music industry. While YouTube offers viewers unlimited access to music videos with advertisements, iTunes charges a fee for downloads. In the near future, both companies will also be mass-marketing their equivalent of Spotify Premium to their existing user base. Earlier this month, on November 12, YouTube unveiled Music Key which will offer ad-free music and videos with out-of-app background listening for $9.99 per month. Meanwhile, Apple has bought the Beats headphone streaming brand for $3 bln, and, if the rumours are true, it will be offering the service on all iPhones and iPads for as little as $5 per month.
It is still unclear what Apple intends to do with its music services: will it merge iTunes with Beats, and will it look to profit from streaming or to use music as an indirect tool for selling devices? The question for Google is whether it will successfully be able to attract paying subscribers. Unlike Spotify which has years of experience in this field, Google has traditionally made most of its revenues from advertisers not users.
So, can these two huge tech stocks take over the music world? It is certainly possible, and there is growing space in the field of streaming for them to position themselves. They’ll just need to take one important lesson from Taylor Swift: if you expect fans to pay, you’ll need to impress and convince them first.
