Technology of the week: Apple Music vs Spotify


Apple Music vs Spotify

Introduction

With the advance of technology, the world has entered a digital society. The inevitable shift to digital music forced the industry to seek new business models. Legal downloads became available with the launch of iTunes in 2003 and a decade later subscription-based “pay-to-stream” services emerged. The streaming services made a large impact on the industry. With Spotify being the current market leader with 75 million users and Apple Music the latest entrant and a serious competitor, a new battle for market share developed. This article will provide an analysis and future prediction of both companies.

Business models

Spotify uses the so called freemium model, which offers free service with additional features that can only be utilized once someone has subscribed to a premium account. In order to also generate revenue from its free users, Spotify occasionally inserts audio advertisements that cannot be skipped. Unlike Spotify’s freemium model, Apple Music uses a free-trial model, meaning that after the free-trial period users are required to pay a monthly subscription fee to make use of the service. Apple Music is trying to offer an all-in-one solution to music lovers and therefore tries to make the monthly cost seem negligible.

SWOT & future prediction

The defining key trend in early 2015 in the global music market is the continued surge in consumer uptake of streaming services. This uptake of streaming services drives subscription to listen to music. On top of this, there is a substantial untapped potential for growth within the paid-for category. So we can say that Spotify and Apple Music are competing in the right market.

At the same time, the streaming market entered a new phase of growth. In a few years a lot of big players entered the market (e.g. Google, Apple, Amazon and Tidal). The near future of this market will cause intense competition between those companies. For Spotify and Apple music to win this fierce battle, a few key trends are extremely important:

– Revenue model and artist royalties. People will choose the service with the most and the best artists. One important factor to attract the most and the best artists is to have a revenue model that is considered to be fair according to the artists. Due to Apple’s subscription model, we expect that they will be more successful in attracting artists than Spotify.

– Partnerships. In order to accelerate the growth of their customer base, they have to form bundled offers with telecom companies and make exclusive deals with artists and labels. It is hard to predict who will be most successful in this area.

– Competition on curation. Surfacing songs and editor recommendations that are tailored to the listener’s taste is key to customer retention. We expect Apple Music to have the best tech team to be able to outperform Spotify in the future on curation.

Another factor that can’t be left unmentioned and can play an important role in gaining market share in this rapidly developing market is the brand community of Apple.

After the analysis of both companies and taking into account their future potential, we believe, that Apple Music will be the most profitable on the long term.

Group 5

Sjaak Meeuwsen – 437156

Claude Zwicker – 437277

Yinuo Jin – 373227

Hidde van Heijst – 436800

Ruud Schippers – 441698

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