Apple Music's Jimmy Iovine says services like Spotify & Pandora can't be profitable

Posted:
in iPod + iTunes + AppleTV edited November 2017
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.
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Comments

  • Reply 1 of 36
    "Apple Music is effectively a "halo" project, used as much to keep people buying iPhones as generate new revenue."

    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.
    kseccgWerks
  • Reply 2 of 36
    darkpaw said:
    "Apple Music is effectively a "halo" project, used as much to keep people buying iPhones as generate new revenue."

    Who buys an iPhone because of Apple Music?
    Someone with an AppleWatch too? Using Apple Music and an LTE Apple Watch is pretty awesome.
    racerhomiejbdragonwatto_cobra
  • Reply 3 of 36
    jdb8167 said:
    darkpaw said:
    "Apple Music is effectively a "halo" project, used as much to keep people buying iPhones as generate new revenue."

    Who buys an iPhone because of Apple Music?
    Someone with an AppleWatch too? Using Apple Music and an LTE Apple Watch is pretty awesome.
    even on non-lte apple watches, actually. as long as you’ve set up which songs or playlists you want stored on the apple watch. pretty awesome imo. i love it paired with airpods.
    edited November 2017 jbdragonwatto_cobra
  • Reply 4 of 36
    darkpaw said:
    "Apple Music is effectively a "halo" project, used as much to keep people buying iPhones as generate new revenue."

    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.
    Obviously nobody buys an iPhone *solely* because of Apple Music, but lots of people buy iPhones at least partially because of the additional Apple services - including Apple Music.

    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.
    king editor the grateracerhomiejbdragonNameo_kiltedgreenrandominternetpersonjony0watto_cobra
  • Reply 5 of 36
    tzeshantzeshan Posts: 1,656member
    jdb8167 said:
    darkpaw said:
    "Apple Music is effectively a "halo" project, used as much to keep people buying iPhones as generate new revenue."

    Who buys an iPhone because of Apple Music?
    Someone with an AppleWatch too? Using Apple Music and an LTE Apple Watch is pretty awesome.
    Using AppleWatch LTE to listen to Apple Music is not suitable to everyone.  You have to say the song and singer to Siri.  Most driver listen to whatever the DJ plays.  And this model has worked for years. 
  • Reply 6 of 36
    Each stream of my tracks from "Kick It" (Mark Allen) generates about .002 cents. Iovine is definitely right about royalties.
    watto_cobra
  • Reply 7 of 36
    1. Jimmy Iovine seriously needs a new look

    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 
  • Reply 8 of 36
    melgrossmelgross Posts: 30,347member
    He’s right, and I’ve been saying this since they first began, around the time iTunes first came out. $9.95 a month is not enough to make these companies profitable. It takes at least $14.95, but people won’t pay that much.
    watto_cobra
  • Reply 9 of 36
    radarthekatradarthekat Posts: 2,310moderator
    Iovine is echoing my own sentiments, posted here a while back under a larger topic.  Here’s that again:

    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.

    king editor the gratebadmonk
  • Reply 10 of 36
    dewmedewme Posts: 1,274member
    I tend to agree with the old dude dressed up as a twenty-something hipster with impeccable dental work. Music has become so commoditized and universally accessible for immediate consumption that it's like a condiment that's used to spice up a real food item. It's no longer the main course and definitely not a meal. Streaming services, especially the free ones, have seriously devalued the monetary side of the music business for the vast majority of artists. On the consumer side it's less clear to me. My music expenditures have decreased to one-tenth of what they used to be since I signed up for Apple Music and iTunes Match. I'm loving it, but I wonder how long it can last in its current form. 
    radarthekatrandominternetpersonbadmonk
  • Reply 11 of 36
    jbdragonjbdragon Posts: 1,700member
    I just use Amazon's Prime Music. The Library is smaller then if you paid for their Music Service, but it's more then good enough for me ans already part of PRIME that I'm paying for. $10 a month for Music streaming for me is to much!! how about $5 a month and limit the number of hours I can play for all I care as I don't tune into a lot of music these days. I've mainly moved to audio blogs.

    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
    edited November 2017 radarthekatwatto_cobra
  • Reply 12 of 36
    Rayz2016Rayz2016 Posts: 3,506member
    No matter how rich you are
    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. 

    edited November 2017 radarthekatkkqd1337asdasdbadmonkcgWerkswatto_cobra
  • Reply 13 of 36
    Rayz2016Rayz2016 Posts: 3,506member
    tjwolf said:
    darkpaw said:
    "Apple Music is effectively a "halo" project, used as much to keep people buying iPhones as generate new revenue."

    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.
    Obviously nobody buys an iPhone *solely* because of Apple Music, but lots of people buy iPhones at least partially because of the additional Apple services - including Apple Music.

    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.
    Same here. I use Music Match, but I don’t really see the value in streaming music. That may change when that Aniston/Witherspoon thing comes out. 

    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. 
  • Reply 14 of 36

    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!


    badmonkwatto_cobra
  • Reply 15 of 36
    Rayz2016 said:
    No matter how rich you are
    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. 

    Let the photos show,
    I took Apple’s dough
    and did it...  my way

    JI
    asdasd
  • Reply 16 of 36
    lukeilukei Posts: 309member
    Actually Chinese Tencent is the world’s most popular streaming service with over 500M users. 
    ksec
  • Reply 17 of 36
    adm1adm1 Posts: 762member
    darkpaw said:
    "Apple Music is effectively a "halo" project, used as much to keep people buying iPhones as generate new revenue."

    Who buys an iPhone because of Apple Music?
    I doubt he meant Apple Music was an exclusive reason for purchasing an iPhone, just that it was yet another part of the larger Apple ecosystem that an iPhone user buys into. Similar to Amazon's Prime offerings (music, books, delivery, etc.)
  • Reply 18 of 36
    ksecksec Posts: 1,485member
    I have been wondering on this for quite some time. What is stopping anyone downloading 1000s CD of illegal ripped Music, and then use Music Match for it?
  • Reply 19 of 36
    I pay for Apple Music... its a great way to build a music collection. I also pay for Spotify premium: its a great way to immerse yourself into the best music from any new artist you discover. This is the very aspect of Apple Music that is so bad: the interface for navigating an artists back catalogue in Apple Music is atrocious. I have loved apple for a long time now (17 years) but they have had long enough to sort out the flaws of Apple Music and they have made very little progress. Parts of the Spotify interface are just superb but I would never use it to organise my music collection. But Spotify has created a special thing that cannot be defeated by trashing their business model. They will survive & they will make profit because they have created a thing that people find useful... just like twitter... just like facebook. After reading this nonsense from Jimmy Iovine I am now fully behind Spotify... just because I love music more than I could ever love a business: no matter how good their design: no matter how much I appreciate the mac. & I would add this... tying artists to exclusive contracts in a steaming service is just wrong... wrong for the art & wrong for the customers you are serving. Apple is slowly starting to get its own head up its arse... something that genuinely never would have happened under Steve Jobs.
  • Reply 20 of 36
    darkpaw said:
    "Apple Music is effectively a "halo" project, used as much to keep people buying iPhones as generate new revenue."

    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.
    As others have commented or alluded to, Apple Music is part of an overall services package that get people to buy iOS products. So, Apple Music — among other services — does actually convince people to step into the Appleverse. It’s also apparently « sticky »: 20- and 30-somethings sign up for Apple Music in larger percentages than for Spotify and other streaming services: http://www.ubergizmo.com/2017/09/apple-music-more-popular-gen-z-millennials/.
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