Apple Music – Is the record industry making all the same mistakes?

By Rob Delmonte

The streaming music market is becoming oversaturated, with a whole host of services competing for the same consumer listenership. Most notable of these entrants is tech giant Apple, who entered the race to reach consumers’ ears with Apple Music on June 30th. Aside from device penetration, brand recognition and deep existing customer bases, the main competitive advantage Apple has over standalone streaming services is the huge financial capital they generate from their primary revenue stream – device sales.

It can be argued that currently, standalone streaming services are ailing. Pandora is waging a war to pay artists and labels less in order to stay financially stable, Spotify announced 20 million subscribers but is still reliant on investment to stay afloat, and Rhapsody axed 15% of its workforce in order to move towards a more ‘scalable business model’.

Meanwhile, Apple, with a reported quarterly revenue of $58 billion certainly are not losing money, and can utilise their big profits to withstand the unsustainability period where it’s streaming service is unprofitable and requires investment. Furthermore, this ‘financial cushion’ empowers the company to use music as part of a subsidiary model, selling low-margin music to support business with higher margins, which is what the company used historically to spur demand for its mobile devices with iTunes.

All this seems to be a repeat of history – and the music industry is repeating all the same mistakes. When iTunes launched, few could imagine it becoming the world’s largest digital retailer of music in just 10 years, with a market share that allowed the company to become the setter of conditions to the record industry rather than a devoted follower of record company executives. Essentially, Apple has dictated the price of digital music, allowing record labels to set individual song prices at 59p, 79p or 99p – a core issue for rights holders as they have relinquished control the conditions of their product in the majority of the digital marketplace.

If Apple Music is a success, and becomes the leading streaming service in the UK, we could see a repeat of this, as a technology company, alien to the music industry, yet again puts a stranglehold on record labels and thus the creators they represent.

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