It is fair to say that Spotify created the modern music streaming service as we know it. There were streaming predecessors, of course, but Spotify created the standard based on a freemium model, flat fees and instant access. It remains the market leader in subscribers and overall influence. But who comes after then? Who are Spotify most important & threatening competitors? And, to frame the issue under the user perspective, who are most able and likely to contribute with significant improvements to the core product of music streaming?
(These are the questions that came to mind as I was finishing listening to the November 2019 episode of “Invest Like the Best”, the excellent podcast hosted by Patrick O’Shaughnessy where Daniel Ek, the Spotify CEO and founder was the guest. Well worth a listen, IMO)
For starters, let’s consider as the relevant universe of streaming services this list compiled by Stuart Dredge at Music Ally, ranking the services by the number of users and subscribers:
Who are the competitors?
Five of them currently have “regional’ streaming services: Tencent, Pandora, Gaana, JioSaavn and Anghani. It is odd to say that Tencent streams music “only” in China (I guess) and Pandora is only available in the US, but for this exercise I am focusing on global streaming services.
Of the five remaining companies, the three largest (Apple, Amazon, Google) are subsidiaries of major tech players. The two smallest are pure play music services.
Soundcloud started exclusively with content directly uploaded by creators, had an unsuccessful attempt to offer subscriptions to commercially released music, was almost acquired by Spotify in 2016 and had a change of management in recent years.
Deezer attempted an IPO in 2015 and had 7 million subscribers by the end of 2018 and has not updated this figure by July 2020. Spotify currently has 138 million subscribers, almost 20x more..
That leaves Apple, Amazon and Google as contestants, and they happen to be the most, third and fourth most valuable companies in the US by market capitalisation as of August 09, 2020. (The second most valuable company is Microsoft and had a saga of its own with digital music and now has a partnership with Spotify).
In a nutshell, Apple leads in users and subscribers, Amazon Music is growing fast as part of the bundle of services included in the Amazon Prime membership and Google serves music content for “more than one billion people” with ad-supported Youtube but has a whole different challenge with regards to subscription services (Youtube Premium for Video, Youtube Music and discontinued Google Play Music).
Is it good or bad for Spotify that its most direct’ competitors are such giants?
Likely both, I guess.
- On one hand they have deep pockets, on the other, they have many priorities.
- They can have deep technological competencies, but a clear management and strategy can be as important.
- The giants have a huge captive consumer base for its other offerings but Spotify has a unique brand and a clear marketing positioning.
Another way of looking in to the matter is to see how the three are competing with another category-creator of streaming entertainment, Netflix:
Amazon Prime video is quite successful as part of the bundle, but I think it has not been exactly a threat. Apple TV plus is very much a work in progress and, as I must link once again, “Apple TV is relatively [not] straightforward”. Google experimented with “Youtube Originals” but only for a while.
Finally, focusing on each music service briefly:
Google Play Music was a well-liked product now being phased-out. Many of its best features are not available on Youtube Music. After many complaints, Google is now promising to fix the situation, but this is not the first time that Google shifting strategies frustrate users.
Amazon music service is not particularly groundbreaking. (Prime users have access to a limited library of 2
million songs, Unlimited charges Spotify-equivalent rates for equivalent catalog and there is a competitive-priced high definition catalogue but it is only available in US). Perhaps the key differentiator is their pioneering work with voice activated home speakers (which may have been overhyped?)
Apple Music works fine and is a credible threat to Spotify. Apparently it is the market leader in the United States. The way Apple encourages iPhone users to sign with Apple Music bothers enough Spotify that they filed a complaint with European antitrust authorities. Yet all the work and the progress depends a lot of how Apple set up the management of Apple Music, defines its strategy and prepares for the future. The July 2019 article from Billboard about the change of management at the service is very interesting. The article is certainly far from impartial, but it makes a strong case that when Oliver Schusser took the leadership role of Apple Music in early 2018 from Beats cofounder and veteran music mogul Jimmy Iovine, there a was lot of homework to be done. One cannot wonder how far along Apple could be if it had all the necessary “structure” since its launch in 2015.