Competition in the online music sector looks much like the cloud computing sector. A small number of companies with huge audience penetration fight to distribute products whose unit production costs are close to zero. Cloud computing and music are not completely identical; cloud storage space and performance are commodities where music can sometimes command a premium price.
The big channels include Apple Music, Google Play Music, Spotify, and Pandora Media. All except Spotify are part of publicly traded companies. Apple's cash hoard makes it the strongest competitor regardless of the other competitors' market penetration. Apple can win any price war and drive less well-funded companies out, just as it can in cloud computing. Apple Music and iTunes do not cannibalize each other thanks to matching through the iCloud Music Library. Apple Insider describes the library's back-end technical challenges; those problems will lead to user cancellations if Apple doesn't fix them soon.
The key difference between cloud computing and music is not the commodification of storage but the brand image and performance of the final product's aesthetic features. The UX design of the desktop interface and mobile app certainly matter. The musical artists' published product is the aesthetic users ultimately want to experience. Listener demand for some artists is price inelastic and those artists exercise outsize power over their distribution channels. Taylor Swift's recent demand that Apple pay its artists during a free trial period has encouraged independent artists to view Apple Music more favorably. Prince demanded that some streaming services pull his music. The streaming services that retain access to the most lucrative music libraries - The Beatles, Elvis Presley, Frank Sinatra, etc. - will have to pay premiums to those artists' publishers, estates, or digital rights managers.
It is too early to tell whether music will become hostage to the walled garden trend in computing. Your favorite artist may very well end up available only on one streaming platform. Limiting exposure in such a way would be a tragedy for the listening audience. Streaming services pursuing two-tier pricing models will continue to charge premiums for unlimited access and special access to the most popular artists, while enabling advertising sponsorship for free subscribers. Keeping those top artists happy means streaming portals must expand both audience share and the presence of smaller artists on their platforms. The bigger the audience, the bigger the advertising subsidy that makes up for the added costs of hosting popular artists. A vast number of boutique performers on a streaming channel should attract a sufficiently sizable demographic base that makes "freemium" advertising permanently viable.
Full disclosure: No positions in any of the companies named above. The Alfidi Capital website and blogs use Google AdSense code to display advertisements.
The big channels include Apple Music, Google Play Music, Spotify, and Pandora Media. All except Spotify are part of publicly traded companies. Apple's cash hoard makes it the strongest competitor regardless of the other competitors' market penetration. Apple can win any price war and drive less well-funded companies out, just as it can in cloud computing. Apple Music and iTunes do not cannibalize each other thanks to matching through the iCloud Music Library. Apple Insider describes the library's back-end technical challenges; those problems will lead to user cancellations if Apple doesn't fix them soon.
The key difference between cloud computing and music is not the commodification of storage but the brand image and performance of the final product's aesthetic features. The UX design of the desktop interface and mobile app certainly matter. The musical artists' published product is the aesthetic users ultimately want to experience. Listener demand for some artists is price inelastic and those artists exercise outsize power over their distribution channels. Taylor Swift's recent demand that Apple pay its artists during a free trial period has encouraged independent artists to view Apple Music more favorably. Prince demanded that some streaming services pull his music. The streaming services that retain access to the most lucrative music libraries - The Beatles, Elvis Presley, Frank Sinatra, etc. - will have to pay premiums to those artists' publishers, estates, or digital rights managers.
It is too early to tell whether music will become hostage to the walled garden trend in computing. Your favorite artist may very well end up available only on one streaming platform. Limiting exposure in such a way would be a tragedy for the listening audience. Streaming services pursuing two-tier pricing models will continue to charge premiums for unlimited access and special access to the most popular artists, while enabling advertising sponsorship for free subscribers. Keeping those top artists happy means streaming portals must expand both audience share and the presence of smaller artists on their platforms. The bigger the audience, the bigger the advertising subsidy that makes up for the added costs of hosting popular artists. A vast number of boutique performers on a streaming channel should attract a sufficiently sizable demographic base that makes "freemium" advertising permanently viable.
Full disclosure: No positions in any of the companies named above. The Alfidi Capital website and blogs use Google AdSense code to display advertisements.
