Saturday 3 December 2016

Spotify re-arms to take on Apple in the battle of the streaming services

Published 11/06/2015 | 02:30

Apple chief executive Tim Cook: the tech giant aims to recah 100m people with its new music-streaming service
Apple chief executive Tim Cook: the tech giant aims to recah 100m people with its new music-streaming service

The battle between Apple and Spotify for music streaming dominance looks set to intensify after the Swedish startup closed a new $526m (€466m) funding round to expand its services.

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The funding round comes just as Apple introduces its own music-streaming service, which aims to compete directly with Spotify around the world.

Spotify's new funding round values the company at $8.5bn (€7.5bn), the highest valued venture backed tech startup in Europe. It also pushes their equity funding to over $1bn.

The funding round was led by Goldman Sachs, which also invested through its Global Private Opportunity Partners fund.

Spotify, which has more than 60m active global users, of whom 15m are paying customers, accounted for almost half of global streaming subscriptions in 2014.

As physical purchases and download sales continue to decline, the competition in the streaming market is intensifying.

The music streaming service Spotify has raised 526 million US dollars (£339 million) from investors globally to help fend off the threat from rival Apple in a move valuing the group at 8.5 billion US dollars (£5.5 billion). Photo: PA
The music streaming service Spotify has raised 526 million US dollars (£339 million) from investors globally to help fend off the threat from rival Apple in a move valuing the group at 8.5 billion US dollars (£5.5 billion). Photo: PA

Apple's 'Music' streaming service will put 35m songs within reach of anyone who pays its €10 per month subscription fee. It comes as sales of iTunes and iPods are falling fast, with people moving away from music ownership to music access over internet devices.

Both 'Music' and Spotify are similar. Both give access to around 30m songs and both can be used on phones (both iPhone and Android) and tablets. The full version of each service costs the same, too: €10 per month.

But it is on pricing that the two rivals start to differ. Spotify has a free version of its product, one that you can even use on a smartphone. On a PC or tablet, you can make playlists or pick songs without paying anything: the only restrictions are short ads every few songs and a limit to how often you can select precise songs. On a phone, the free version is more limited but still lets you choose artists or albums.

Apple will have no similar free version. Instead, it is emphasising 'human curation' of playlists and songs, culminating in a dedicated live radio station hosted by celebrity DJs (including former BBC presenter Zane Lowe) in London, New York and Los Angeles.

One of Apple's selling points is a 'family' price of €15 per month that allows six separate people (meaning six separate devices) use the service. This could probably be shared among six friends, too, although it's a single billing point.

Spotify currently has the same allowance for the same monthly tariff, albeit structured in a different way. A single premium Spotify account can be used on three separate devices (phones, tablets, computers or a mixture of all three). Adding a second premium account costs €5, meaning you get six separate devices for €15 per month. Some may see Spotify having an advantage here, because you can divide the monthly cost between two people.

Spotify has some other advantages. It leans heavily on Facebook integration, meaning that it is easy to share tracks or go and see what friends might be listening to. This latter feature - serendipity and curation from people you know - is a very underrated element of Spotify. It is also currently integrated into some 'bundled' services, such as certain Vodafone mobile phone tariff plans.

On the other hand, Apple will probably have a slightly better music selection. Although both services are similar at around 30m tracks, Apple's catalogue might be a little deeper thanks to deals it has with some ultra-premium artists. For example, iTunes currently has Beatles tracks while Spotify doesn't. And while not quite in that league, Taylor Swift has already indicated that her tracks will be on Apple Music but not on Spotify.

Perhaps Apple's biggest advantage is that the Music app will automatically load onto everyone's iPhone when the device's software is upgraded. That means that anywhere up to 500m people worldwide will soon see the little app symbol on their phone. That is a huge home advantage for Apple and will make it that bit simpler to attract new users.

Both services face formidable competition from the service that kids often instinctively turn to first: YouTube. Google's video service is both free and lets people look at their popstar idols at the same time.

But what wasn't announced on Monday in San Francisco -- a new TV service -- may be more telling about the challenges facing chief executive officer Tim Cook as he seeks new sources of revenue. The company, which had been negotiating with potential partners, scrapped plans to introduce a service because it wasn't ready, people familiar with the effort have said.

Streaming TV would have been the third leg in a new media push to keep Apple at the centre of people's digital lives - a source of not just music and information, but also video entertainment. Apple upended the music business more than a decade ago by selling individual songs online, becoming the world's largest music retailer. But that position is in danger with the industry's streaming revenue to exceed sales from downloads, according to MusicWatch.

Traditional TV, too, is in flux with the rise of Netflix and services that look to replace cable television.

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