Tag Archives: Apple Music

How Apple Wins by Sensing and Responding

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Apple no longer sits at the cool kids’ table. It runs the table. 

The company recently reported quarterly revenue of $91.8 billion, an increase of 9 percent from the year-ago quarter and an all-time record, and quarterly earnings per diluted share of $4.99, up 19 percent, also an all-time record. Apple continues to make fools of analysts who’ve questioned the company’s relevance, especially amid a slump in iPhone sales. Well, guess what: iPhone sales are doing just fine after all. And so is Apple’s stock price year over year:

Now consider this:

  • Siri, once the weak sister among smart voice assistants, has the world’s largest market share, even more than Amazon Alexa, Google Assistant, and Microsoft Cortana. Turns out the never-say-die iPhone and the release of AirPods Pro have helped propel Siri to a wider base of users.

What do all the above statistics tell you? Apple is defining its market as well as it always has, just in different ways that are perhaps not as earth shattering as the launch of the iPhone in 2007. (Let’s face it: the iPhone was like Van Gogh’s “Starry night over the Rhone” – a masterpiece and highwater mark that is seldom if ever matched again). For example:

  • Apple saw the rise of wellness care coming and positioned the Apple Watch not as a cool wearable but as a healthcare device. As CNBC reported, “Apple’s wearable category which includes the Apple Watch and AirPods wireless headphones, has been growing strongly. In the December quarter, that division brought in over $10 billion in net sales, a near 27% year-on-year increase.” In a newly published Hacker Noon article, I dig into the reasons why the Apple Watch has flourished in context of Apple’s strategy to be the data backbone of healthcare. 
  • Apple saw a growth opportunity in services (as opposed to hardware sales). Its Services division reported an all-time high in revenue growth for the most recent quarter, $12.7 billion versus $10.8 billion year over year. For its fiscal year 2019 (ended September 28, 2019), Apple reported $46.3 billion in Services, a 16 percent year-over-year increase. 
  • Apple got out in front of the rise of the voice-first world and introduced Siri in 2011, beating Amazon Alexa to the market by three years. (But Amazon completely outflanked everyone, including Apple, in the smart speaker market with the launch of the Amazon Echo in 2015.)

What’s next for Apple? Becoming a credible player in the streaming wars. Apple TV+, launched in November 2019, has a long, long way to go. Apple TV+ is being met with the same derision that Apple Music once faced. And whereas Apple Music could play catch-up by developing an formidable library of someone else’s music, Apple TV+ needs to develop original content to compete with Amazon, Prime Video, Disney+, and Netflix. 

But don’t ever underestimate Apple. The company has a huge reservoir of cash, and it’s willing to dip into it an example being the recent hiring of Former HBO CEO Richard Plepler to run Apple TV+. 

Do you really want to bet against Apple?

Amazon: One Industry to Rule Them All?

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For once, Amazon is playing catch-up.

The great disruptor is just another player in the entertainment space. Amazon Studios, its TV and movie arm, is still looking for a blockbuster like Game of Thrones to compete in an elite league defined by HBO, Hulu, and Netflix. Amazon Music is a follower behind Spotify and Apple Music.

But recently Amazon has made some moves in a bid to transform itself from a follower into a leader. Let’s take a closer look. Continue reading →

How Apple Got Its Groove Back

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Three years ago, Apple looked like a music dinosaur. The company was reeling from the embarrassment of foisting upon iTunes customers digital copies of U2’s Songs of Innocence – an incident that laid bare Apple’s reliance on downloading at a time when the music industry was marching inexorably toward streaming. But Apple has regained its groove, and the purchase of irresistibly fun and popular music discovery app Shazam is but one indication.

After licking its wounds in the aftermath of the U2 debacle, Apple focused its considerable resources on launching a streaming service, Apple Music, in 2015 — and then proceeded to show how quickly one of the world’s most powerful brands can right the ship.

Apple Music now boasts 30 million paid subscribers. Although its biggest rival Spotify has double that amount, Apple has eclipsed nearly everyone else in the streaming industry within 24 months, making it and Amazon the only alternatives to Spotify to lead the streaming music business. Just as remarkably, Apple had developed its own brand of cool by building a well-regarded catalog and affiliating itself with the right artists through endeavors such as Beats 1 radio.

A Deep, Well-Curated Catalog

Apple Music’s mix of algorithms and human curation appears to be working. The company put the right talent in place to curate its catalog, starting with Scott Plagenhoef, Apple’s global head of programming and editorial. Formerly editor of the oh-so-hip Pitchfork, he joined Beats Music in 2012, and then joined Apple in 2014 when the Apple bought Beats. And although Apple Music’s playlists haven’t gained as much acclaim as Spotify’s vaunted artificial intelligence-based curation, Apple is earning respect. Recently Apple Music scored a major coup when hip-hop tastemaker Andrew Barber agreed to curate Apple Music’s New Chicago playlist, which provides exposure for up-and-coming Chicago talent as Barber’s Fake Shore Drive blog has done for years.

Artist Affiliation

No longer is Apple the brand that forced uncool U2 down our throats. Apple Music is now where you go to stream radio shows hosted by the likes of Charli XCX, Drake, Frank Ocean, Continue reading →

Is HomePod Apple’s Death Star in the Music Streaming Wars?

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Apple’s newly announced HomePod smart speaker is more than Apple’s answer to Amazon Echo and Google Home in the battle for your home – it’s quite possibly Apple’s major advantage in the music streaming wars.

In unveiling the HomePod June 5 at its Worldwide Developers Conference (WWDC), Apple announced that the voice-activated speaker will be a music-first experience that combines both the quality of high-fidelity Sonos speaker and the intelligent interface of the Amazon Echo – with a focus on providing users access to the Apple Music catalog. As Apple noted in a press release,

Designed to work with an Apple Music subscription for access to over 40 million songs, HomePod provides deep knowledge of personal music preferences and tastes and helps users discover new music.

At WWDC, Apple Chief Executive Tim Cook said the speaker has “amazing sound and incredible intelligence that will reinvent home music.”

Why the focus on a high-fidelity experience with an emphasis on music? One reason is that Apple wants to be the leading music streaming provider – badly. After disrupting the music industry through iTunes and the iPod, Apple found itself looking behind the times when consumer tastes shifted from downloading songs on iTunes to streaming them on apps such as Spotify. And looking outdated is strange ground for Apple. Apple’s desire to play catch up with streaming was a big reason why the company paid $3 billion for Beats in 2014. Months after buying Beats, Apple launched its own service, Apple Music, in 2015.

The good news for Apple is that within two years, Apple Music has become the Number Two streaming service as measured by paid subscribers. And these are heady times for streaming services such as Apple Music and Spotify. In 2016, for the first time ever, streaming music platforms generated the majority of the U.S. music industry’s revenues. As the RIAA noted, the biggest contributor to growth was a doubling of revenues from paid streaming services. But for Apple, there is also some bad news:

  • Amazon has been rapidly encroaching upon music streaming. It offers a limited service to Amazon Prime customers (Amazon Prime Music) and recently launched a subscription service, Amazon Music Unlimited.

Spotify and Amazon are significant competitors with their own strengths and weaknesses:

  • Spotify enjoys the strong brand affiliation with music, its customer base, and outstanding personalized playlists, but the company is losing money.

  • Amazon enjoys an advantage with its deep pockets and the popularity of Echo speaker, which provide a natural platform for streaming music. But Amazon Music Unlimited is an upstart (and Amazon Prime Music is a feature of Amazon Prime, not a pure streaming service, per se).

The Echo factor is big. Echo has experienced astounding growth to dominate the market for voice-activated home speakers, as people become more comfortable with the voice interface. It’s like a Swiss Army knife for doing everything from controlling the temperature in your home to ordering products.

And in addition, Echo is also a platform for playing music through voice commands (“Play the new Lorde song”), something Spotify does not offer. In 2017, according to eMarketer, 35.6 million Americans will use a voice-activated assistant device at least once a month, and 71 percent of them will use Echo. (Google Home has the second highest marketshare behind Echo, at 24 percent, but Google does not release user figures for its Google Play streaming service.)

No wonder Amazon offers Amazon Music Unlimited at its lowest price to owners of Amazon Echo speakers: Echo is a Trojan Horse for Amazon’s music streaming product.

But Swiss Army knives, while being useful, are not great at everything. The Echo is not engineered specifically to listen to music. HomePod is. At WWDC, Apple Senior Vice President of Global Marketing Phil Schiller said that HomePod will provide the high quality of a Sonos speakers and the smart interface of the Echo.

“These aren’t smart speakers, Schiller said of Sonos. “They don’t sound so great when you listen to music,” he said of the Echo. But HomePod will sound great and act as a home musicologist, he said.

He indicated that the HomePod will make it possible for consumers to call up music using complex voice searches and then listen to music through a product that provides state-of-the-art sound including spatial awareness, which adjusts the audio depending on where you are sitting in the room.

But the ace in the hole is the integration with Apple Music. As Apple announced,

By saying, “Hey Siri, I like this song,” HomePod and Apple Music become the perfect musicologist, learning preferences from hundreds of genres and moods, across tens of thousands of playlists, and these music tastes are shared across devices. Siri can also handle advanced searches within the music library, so users can ask questions like “Hey Siri, who’s the drummer in this?” or create a shared Up Next queue with everyone in the home. HomePod, Apple Music and Siri deliver the best music experience in the home that streams ad-free directly to HomePod.

HomePod will also provide the same functionality as Echo, providing functions ranging from turning on the lights in your home to providing sports and weather information.

The HomePod should be available in December at a cost of $349, a cost that is significantly higher than Amazon Echo and Google’s own Home speaker. By pricing the HomePod at the high end, Amazon is banking on consumers:

  • Accepting Apple’s position as a premium brand.
  • Caring enough to pay more for better sound.
  • Subscribing to Apple Music because it’s so easy to listen to music with voice commands on HomePod. (I wouldn’t be surprised if Apple offers an incentive for bundling Apple Music paid subscriptions and HomePod.)

It’s an interesting bet. Consumers have been indifferent to sound quality on mobile devices, not caring enough about sound quality to buy high-end mobile streaming products such as Pono. Meanwhile in the home environment, the growth and popularity of Sonos speakers for years showed that people would pay for premium sound  – but then Amazon’s encroachment on Sonos suggest that consumers were willing to sacrifice the fidelity of Sonos for the convenience of Echo. And now Apple believes consumers will do the same with HomePod.

Apple won’t put a dent in Echo’s 71-percent market share anytime soon, but Apple doesn’t need to. Apple is not offering a utility that competes on price as Echo does. Apple is selling a high-end experience first and utility second. Apple Music is central to that experience. Will HomePod be a catalyst for Apple Music to eat into Spotify’s lead?

Drake and Jay Z Write Rules for Music Moguls

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Drake and Jay Z are among the most successful musicians year after year. Between them, they earned $92 million in 2016 while making the list of Forbes highest-paid musicians, adding to the nearly $97 million they pulled down in 2015, and $93 million in 2014. Drake’s 2016 album Views was a gigantic commercial success (which is saying something in the era of the single), and he gets the most streams of any artist on Spotify. Recently both made the news for two different reasons: on March 6, Jay Z launched a venture capital firm, Arrive, to invest in startups. On March 18, Drake released a 22-song playlist, More Life, that promptly broke two Spotify streaming records and one Apple Music streaming record. Drake and Jay Z demonstrate how the new music moguls are defining success for the recording industry. On the one hand, Drake illustrates why artists need to hustle their songs constantly in an on-demand economy. And Jay Z understands why musicians — even the elite — need to build personal brands that transcend music.

Drake: Hustle Your Music

Drake knows that making music inaccessible doesn’t work in the on-demand economy. You can’t expect fans to buy your albums to find hidden gems of songs that reward patient listening the way Led Zeppelin used to do in the glory years of album oriented rock. As Brian Solis once noted, attention is a currency to earn and spend. And attention, while difficult to earn, is easily spent. Keeping anyone’s attention is increasingly difficult at a time when Americans own four devices on average and toggle their way through a sea of websites, apps, games, and other distractions that compete for our time. So Drake distributes music liberally, dropping multiple songs like attention bombs as he did with More Life, Views in 2016, and If You’re Reading This It’s Too Late in 2015 (along with a short film for good measure). He doesn’t expect his fans to wait for a new album to hear his new songs — he maintains a constant hum of activity through his music, supported by a strong social media presence.

As Dan Rys of Billboard noted, “Unlike superstars for whom every move is an event, Drake keeps his activity at a constant simmer, peaking at ­strategic moments.” As a result, he is one of the few artists in the Forbes list who made the bulk of his money in 2016 from music sales.

Even Beyoncé, whose every album is an event, keeps our attention by releasing a barrage of videos to support her albums. Artists need to feed a content stream to keep their names visible. As music pundit and consultant Cortney Harding once told me, “Albums take a very long time to make, and artists can’t remain silent in between album releases, especially when everyone else is releasing a steady stream of content on YouTube. If you want to release an album a year from now, you need to release a song a month and content between songs rather than remain quiet and expect fans to wait for the big release day.”

For Drake, every day is release day.

Jay Z: All Business, Man

Jay Z has always known his brand is bigger than music. Even as his star was ascending as a rapper in the 1990s, he was creating business ventures. In 1996, Jay Z cofounded of Roc-A-Fella Records, and then a few years later cofounded Rocawear clothing line. He Jay Z operates businesses such as his entertainment company Roc Nation and Armand de Brignac champagne (which he acquired in 2014). As he put it, “I’m not a business man, I’m a business, man.” (Ironically the one venture that he’s apparently not mastered is streaming. His Tidal streaming service has famously struggled.)

In 2016, he released no new music, and he didn’t tour. And yet he earned $53.5 million as he cashed in on his many business ventures. His latest, Arrive, will invest in early-stage startups and provide support ranging from marketing to business development. Part of Roc Nation, Arrive will apply Roc Nation’s entertainment management experience to support entrepreneurs (and that experience is considerable, as Roc Nation works with the likes of J. Cole and Rihanna.) Arrive will apparently not restrict itself to entertainment startups.

Jay Z has also proven to be an innovative business operator with his music. For instance, in 2013, he signed an intriguing deal with Samsung to distribute one million copies of his Jay Z’s Magna Carta Holy Grail album through a special app exclusively on Samsung phones before the album went on sale publicly. Samsung reportedly paid $5 for every album, meaning Magna Carta Holy Grail sold $5 million before a consumer purchased a single copy.

As I noted in my ebook The New Music Moguls, the successful moguls who regularly make the Forbes list of highest-paid musicians build their audience through recorded music, but make their real money elsewhere, whether from touring, endorsing products, or investing in businesses. Dr. Dre may have earned his reputation as a rapper, but he earned his biggest payday, $620 million, through his stake in Beats Electronics. Diddy is worth hundreds of millions of dollars because of his branding deals with Cirac vodka and Aquahydrate. The list of celebrities as business brands goes on and on: Katy Perry (who has cobranded music with H&M), Luke Bryan (who endorses Miller Lite), Rihanna (who has her own footwear line with Puma), and Taylor Swift (who earned $170 million in 2016 through touring and via deals with Keds, Diet Coke, and Apple). Oh, and Drake hedged his bets through branding relationships with Apple, Nike, and Sprint. They all realize that recorded music is a launching pad, not an end unto itself.

The days of consumers rushing out to buy recorded music are over. We’re streaming songs, discovering music through ads, apps like Snapchat, and many other platforms that didn’t exist before digital. But music no longer engages our hearts. Music captures a fraction of our attention at best. The new music moguls grab our attention through their music and turn attention into money through their personal brands.