The Frame

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Apple vs. Spotify: What to expect from Apple's music streaming service

by John Horn and Robert Garrova | The Frame

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Apple CEO Tim Cook delivers the keynote address at the Apple 2012 World Wide Developers Conference (WWDC) at Moscone West on June 11, 2012 in San Francisco, California. Justin Sullivan/Getty Images

Next week is Apple’s annual Worldwide Developers Conference (WWDC) in San Francisco, where the company is expected to introduce its long-awaited music streaming service. Once launched, Apple’s option will immediately compete with industry leader Spotify, and possibly create another hurdle for Jay-Z’s Tidal streaming service.

But Apple has some big challenges ahead, including signing up some of the industry’s biggest labels, which are on the Apple fence. Ethan Smith of the Wall Street Journal wrote a piece with Daisuke Wakabayashi on Apple’s expected streaming service and he spoke with the Frame’s John Horn.

Interview Highlights

What is Apple expected to offer with its streaming service?

“Apple is expected to offer something that, in a lot of ways, is pretty similar to Spotify or Tidal or several other competitors. You pay $10 a month and you can listen to as much music as you want.”

Why has it taken Apple so long to get its streaming service up and running?

“Apple and Spotify each have almost exactly the same market share in their respective markets. Apple has 85 percent of the download market. Spotify has 86 percent of the on-demand streaming market... For a long time [Apple] believed in the value of music as something you actually buy as opposed to a sort of fungible commodity that you rent in these mass quantities."

Apple spent $3 billion acquiring Beats. How will Beats be incorporated into what they’re doing, and what is the potential upside for Apple in this deal?

“The average iTunes customer spends $30 a year downloading music. So what Apple really needs to do for this to work is to convince a healthy number of those people to pony up and subscribe. Because, obviously $120 a year is a lot more than $30 a year."

It’s a very fractured world for music consumers. Who’s going to win here, is it going to be the companies or the music fans?

“The jury is just way out on that. I mean, for the time being, music fans can just listen to whatever they want for free if they have the time. They can just go on YouTube and listen to anything. For people who buy a lot of music, $120 a year for unlimited music is a good deal. For people who buy three albums a year, that’s a big outlay and they may not do it.”

How are the record companies assessing what Apple is proposing in terms of their bottom line?

“The big music companies see the writing on the wall. Downloads grew consistently for a long time, now they’re declining. Streaming is increasing pretty rapidly at this point. To a very large extent they’ve reconciled themselves to living in a world where this is how things happen. If people are paying for music, that is much better for music companies than any alternative.”

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