Saturday, March 9, 2013

Why There Are So Many Streaming-Music Rumors Right Now


Photo: Silly Little Man / Flickr
If you’ve been following the news this week, you could be forgiven for wondering why there have been so many stories about products that don’t yet exist, namely streaming services from Google and Apple. There’ve been so many stories about this because whatever deals are struck will define the music market for quite some time.

Apple and Google are going to upend the streaming business because music has become a commodity. Everyone has more or less the same content. That means streaming services have to sell on pricing plans and features. Too many features and your product gets bloated. Not enough and people embrace your competitor. It’s a tough market, one that’s already chewed up and spit out MOG. The only thing that can cause a shakeup is distribution, and the only companies in the position to do that right now are Google and Apple. That’s why the negotiations are so intense, and why there’s so much behind-the-scenes chatter.

The only reason we know what either of these companies are up to is because somebody leaked. We’ve heard Apple is in on-again, off-again meetings with labels trying to hammer out a price. We’ve heard Apple met with Beats — which has its own streaming service on the way. We’ve heard Google/YouTube is launching at least one (and possibly two!) streaming services, pending label negotiations. Neither company is saying anything, officially. But still the stories come, because labels are compelled to leak negotiations.

The most recent Apple news is a great example. The New York Post reported that Apple wants to pay $0.06 per 100 songs streamed, while Spotify pays $0.35 and Pandora pays $0.12. It makes Apple look cheap, and strong-armish — which could bolster the labels’ position. Following quickly on the heels of that story, The New York Times reported that talks had more or less broken down, and the service is most likely on hold until the summer.

The leaks speak to the power Google and Apple will have in this market. The music industry is applying pressure because these two companies will define the wholesale price of music for years to come. Consider that the iTunes Store launched a decade ago this April, and while pricing and percentage details have changed, the music industry is still doing business on Apple’s terms. Now Apple and Google are in a great position to call the tune again because of something that didn’t exist in 2003: ubiquitous smartphones.

Those two behemoths have more retail storefronts in the form of smartphones than anyone else could hope to muster. Subscription and streaming only took off once 3G made it possible for you to carry your music with you everywhere. Pandora, Spotify, and Rdio have proved there’s an attractive market. But imagine what happens when a streaming-music app ships with your phone, with every phone, and all you have to do is turn it on, using an account you’ve already set up for billing. Or even worse (if you are an existing streaming-music provider) if it’s a free, advertising-supported service.

If Google and Apple do something like this, they are big enough to instantly transform — and own — the marketplace. Especially because both can add value by including apps that run on other platforms and connect to your entertainment center. So maybe the Apple deal is pushed back to this summer. And maybe Apple and Google are going to be late to this game. But no matter when they come in it won’t be too late, because with the right offering, shipping on handsets, running on tablets and desktops and TVs, they’re going to dominate and control it.

The labels may not be the best-run businesses out there, and they’re certainly not the most tech savvy, but even they can see that. So they’re leaking to put pressure on negotiations. Which means you’re going to continue to see a steady drip-drip-drip of details on whatever deal is about to be struck until, suddenly, it all stops. And that’s when you know that something is really on the way: When the stories stop.

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