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.
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 →
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).
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.
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?