Technology of the week – Team 29 – Spotify vs Itunes
Our team decided to compare two companies active on the online music market. One of these companies is Spotify, focusing on online streaming, the other is Apple with iTunes, focusing on the actual sale of music. In our paper we have compared the two business models, a summary of this comparison can be found below.
Spotify was established in 2006 in Sweden. As of May 2014 the number of users was 40 million (Spotify, 2014). Their business is based around the concept of streaming music, instead of selling it for download and offline storage. Currently, Spotify offers two types of subscriptions: (1) a free subscription that offers music streaming which is occasionally interrupted with audio advertisements and (2) a paid subscription which offers higher quality audio and is ad-free. Music can only be used offline using a paid subscription, which approximately 25% of the user base has (Spotify, 2014).
Apple launched the ITunes Store on April, 2003. It’s a virtual store providing digital music for people to buy and download. At release, the iTunes store contained 220,000 songs but over the years it became the largest virtual music store in the world with over 43 million songs available. iTunes has diversified its content over the years, by adding movies, TV shows, radio, apps, books and games.
Spotify has a big advantage over iTunes in that it allows users access to all music in its library without restriction for a set monthly fee, allowing users more access for a potentially lower price. You need to keep paying to retain access to the music though. If you only listen to a limited number of songs, buying them might be cheaper in the long run. Spotify also has a free version, which is a big advantage for people who don’t mind the ads.
Spotify has about half the songs available compared to iTunes, but for most mainstream users both have enough to offer. ITunes also has a better relationship with content providers. Many copyright owners are sceptic about Spotify’s business model and complain about relatively low payouts. Some artists, such as Coldplay, have elected not to release their new albums on streaming services, instead only making their music available for purchase. This may be mitigated by the fact that Spotify has been very successful in reducing piracy. Many people have a free subscription, or even a paid subscription, who would have otherwise pirated their music. Audio quality is equal between iTunes users and Spotify’s Premium subscribers. Free users, however, get a lower quality.
Many people agree that streaming will, on the long run, become more popular than downloading music is. iTunes sales are projected to drop by 39% in the next four years (digitalmusicnews.com, 2014). Much of this growth in stream users has gone at the expense of people who used to buy music online. Apple is clearly aware of this trend, as evidenced by their recent takeover of Beats Audio. It will be very interesting to see how Apple will adjust its strategy to accommodate streaming, and how the market will develop in the future.