Apple Music's Jimmy Iovine says services like Spotify & Pandora can't be profitable
Apple Music executive Jimmy Iovine once again criticized the business models of rivals in an interview published on Wednesday, this time arguing that streaming services without other attached businesses are inherently unprofitable.
"The streaming services have a bad situation, there's no margins, they're not making any money," Iovine explained to Billboard. "Amazon sells Prime; Apple sells telephones and iPads; Spotify, they're going to have to figure out a way to get that audience to buy something else. If tomorrow morning [Amazon CEO] Jeff Bezos wakes up and says, 'You know what? I heard the word "$7.99" I don't know what it means, and someone says, 'Why don't we try $7.99 for music?' Woah, guess what happens?"
Spotify is the world's most popular on-demand streaming service, with over 60 million paid subscribers and many more listening to a free ad-based tier. Apple Music has over 30 million customers in total, with no free option beyond a three-month trial.
Spotify, however, has struggled to achieve profitability, funneling any revenue increases into cementing its foothold. Apple Music is effectively a "halo" project, used as much to keep people buying iPhones as generate new revenue. Conceivably Apple could slash subscription prices and still come out ahead because of the large profits it makes off hardware.
Iovine has been highly critical of companies like Spotify and Pandora, for example saying that their free tiers don't generate enough royalties for artists.
"The streaming services have a bad situation, there's no margins, they're not making any money," Iovine explained to Billboard. "Amazon sells Prime; Apple sells telephones and iPads; Spotify, they're going to have to figure out a way to get that audience to buy something else. If tomorrow morning [Amazon CEO] Jeff Bezos wakes up and says, 'You know what? I heard the word "$7.99" I don't know what it means, and someone says, 'Why don't we try $7.99 for music?' Woah, guess what happens?"
Spotify is the world's most popular on-demand streaming service, with over 60 million paid subscribers and many more listening to a free ad-based tier. Apple Music has over 30 million customers in total, with no free option beyond a three-month trial.
Spotify, however, has struggled to achieve profitability, funneling any revenue increases into cementing its foothold. Apple Music is effectively a "halo" project, used as much to keep people buying iPhones as generate new revenue. Conceivably Apple could slash subscription prices and still come out ahead because of the large profits it makes off hardware.
Iovine has been highly critical of companies like Spotify and Pandora, for example saying that their free tiers don't generate enough royalties for artists.
Comments
Who buys an iPhone because of Apple Music?
Off-topic: Apple Music ballsed-up my iTunes library. My carefully-curated, fully-ID3-tagged library started since the first version of iTunes was mangled so much I had to wipe it and start again. Thanks for that, Apple.
Off-topic: I don't use Apple Music, but I love Music Match! For $25/year, I got a high quality version (ie. Apple's version) of my 300 CD collection I ripped (at low quality) a long time ago. After I signed up, I subsequently deleted my local library (backed it up of course), and Apple rebuilt it with the high-quality version :-). I could stop the service and end up with a much better library :-) But I have kept it - because it lets me keep stuff in the cloud without using up my storage allocation.
2. Music streaming is a commodity service, I really don’t care where I get it from as long as the app works and the price is right
Be THE future of something
Was thinking about this one, and it finally occurred to me, after all the years I’ve been in the market, the proper phrasing for how to think about the GPROs, FITs, ROKUs, Ps and FBs of the world. And that’s this... “if you’re going to be a steady climbing stock that has a future valuation that makes the current valuation pale in comparison, you have to be THE future of something.” Not part of the future, not along for the ride. You really have to be the driver of the future of something significant. FB was, back at $19/share, the future of social media. (I missed that one.)
But GPRO was not the future of how people use cameras. At best it was, and remains, a niche. The smartphone is the future of how people use cameras; okay but evolving optics strapped to a huge screen and a very capable processor with built-in AI to get the most out of the images. That’s an iPhone.
FIT is not the future of wearables. That’s a smartwatch connected to a huge ecosystem, home control systems, music streaming, hime/car/office/hotel room access, notifications, fitness, health monitoring and recording and reporting, etc. That’s Apple Watch.
P (Pandora) and Spotify are not the future of streaming music, maybe for no reason greater than its a business trying to profit on streaming music. Streaming music’s future might not be profitable; there may simply not be a profitable business model to be built around it. Apple Music, of course, isn’t reliant upon that. It can branch out in myriad unprofitable directions to enrich the user experience and bring more content than can a business that has to show a profit. Think subsidizing budding artists in return for a period of exclusivity. Think Carpool Karaoke and other exclusive and free content additions. Streaming music is just along for the ride, the future being successful platforms that provide such services.
Roku is not the future of streaming video. It’s just one player among many that has no specific advantage in the long evolution and eventual shake out and consolidation. No more than RIMM [Blackberry] was the future of smartphones. In the end, the biggest players with the deepest pockets will own this market.
To be investable, you can’t just be involved in the future, you have to be THE future of something.
Spotify hasn't made a profit since they've launched. In fact they lose more and more money every year. As they get more users, they lose more money!!! How they can get anyone to lend them more money at this point is beyond me. It's a money pit. Keep throwing money at it in the hope that they'll turn a profit at some point. of course if they make a tiny profit, big deal. They're in the hole so badly it would take years to get back out of it. The free users are sinking them. But they can't drop them because it makes their user base much larger. More users, #1 Music streaming service, you can keep milking that and they have.
Apple only has 30 million but they're all paying. Apple is happy enough to break even. If they make a little profit, all the better, but it's just a over all part of Apple's services. Where Apple makes most of their money on the hardware they sell. I don't have anything against Spotify, but it's another Internet Startup, that still can't make a profit after years!!!
https://www.forbes.com/sites/hughmcintyre/2017/06/15/spotify-lost-more-than-600-million-from-3-3-billion-in-revenue-in-2016/#5f0d5ecc7008
Or how successful you become
You will reach a point in your life
When it’s time to stop wearing your baseball cap
back to front.
And I still think that if you subscribe to Apple Music then you should get Music Match thrown in for free. It seems like such a no-brainer, I wonder if it’s the record companies stopping them from doing it.
I have never tried any other service so my take is inherently flawed and biased. Pandora and Spotify (and Tidal) are not available here, but I don't even try the local ones that are available here.
I personally use any service Apple offers first and look for alternatives only out of necessity (like 1Password for protection and Office 365 for broader compatibility).
I love the convenience of just downloading an album or a song on a whim and listening to it, which is where Apple Music comes in. The fact that Apple Music costs about $2 for a family subscription here also helps!
Over the course of months, I learnt how to make Apple Music, iTunes Match and my personal library work for me. There are some niggles, like when I rip a CD on my Mac, I need to wait for it to be uploaded onto iCloud before I can download it onto my iPhone. I'd prefer to copy it locally.
But I still love buying a box set or an LP and all the romance that goes with carefully removing the shrink wrap to ensure that you don't tear it (the LP has to go back in!), reading the liner notes, looking at the artwork when listening to the music and ensuring that all the stickers are carefully stored in the set!
I took Apple’s dough
and did it... my way
JI