Apple Music to enter the streaming game

Apple will be launching its new music streaming service on Monday at the World Wide Developers Conference, Sony Music CEO Doug Morris announced Sunday in an interview at the Midem Festival in Cannes.

Though specific details have not been announced, rumors suggest that industry stars such as Dr. Dre, Drake, and Pharrell will act as DJs, curating music through channels in an imitation of traditional radio that deviates from the algorithm-run model of services like Pandora, Spotify, Apple-owned Beats Music, and Apple’s own iTunes Radio.

Unlike Pandora and Spotify, though, which have free, ad-supported versions with available paid upgrades, Apple Music, as it is expected to be called, will be offered as a subscription-only service priced at about $10 monthly. While iTunes Radio was widely regarded as unsuccessful, the global shift away from music downloading in favor of streaming has Apple trying again.

Data from Nielsen and the Recording Industry Association of America show that in 2014, on-demand streaming services realized over 60 times as many transactions as digital download services. However, streaming only generated about half as much revenue as downloads. The popularity of the former versus the profitability of the latter highlights the conflict facing music professionals as access to music becomes easier and cheaper.

Despite focused attention on the online music market, digital music sales and subscriptions only recently reached the level of CD and physical format sales. However, piracy and free Internet streaming sites still divert large numbers of consumers. Analyst and consultant Mark Mulligan of Midia Research Company told The Guardian last year that in the music industry, that’s just business.

“Every new generation of music service steals from the last generation’s customers,” Mulligan said. “Apple stole Amazon’s best CD buyers, and Spotify has now stolen those same customers from Apple – or at least the same sorts of people.”

As long as people have free access to music via sites like YouTube, Mulligan said the majority will opt not to pay for streaming services, no matter how low the cost. In his report “How Streaming is Changing the Music Industry,” he found that only 22 percent of music streamers say they would pay $9.99 a month for a music subscription, and concluded that lower-priced services are the key to redirecting consumers away from free streaming and into a more economically sustainable model.

Referencing Apple’s then-recent acquisition of Beats and its plans for Apple Music, Mulligan predicted, “Whatever Apple does could reshape the entire streaming market.” At $10 a month, though, it looks as though Apple Music will not be undercutting competitors in the way Mulligan had hoped.

Spotify currently leads the worldwide music streaming business with over 60 million worldwide users, a quarter of those being paying members. Still, Morris said he expects Apple’s resources and consumer base to propel it to the front of the pack and make it a “tipping point” in the shift to streaming.

“What does Apple bring to this?” Morris said. “Well, they’ve got $178 billion dollars in the bank. And they have 800 million credit cards in iTunes. Spotify has never really advertised because it’s never been profitable. My guess is that Apple will promote this like crazy and I think that will have a halo effect on the streaming business.”