Key Points
  • Apple has to reinvent the business model in the music industry the way Netflix did in TV programming
  • To build that kind of stickiness, Apple has to impact consumer behaviour at three levels: content, control and curiosity
  • Apple needs to find a way to harness all the unique user data that the platform generates, to become the number one music app in the market

Apple Music, as we observed in previous installments of this series, has the potential to be an exciting music experience – it offers a hybrid between Pandora and Spotify read blog1, has a rich catalog of over 30 million songs read blog2, and features heavyweights such as Taylor Swift and AC/DC among others. In addition, the recent launch of the new series of iPod Touch after a gap of three years, signals a restored music focus in their device strategy too. Not only does the new iPod 6th Generation support Apple Music, it features much-needed upgrades such as the ability to search for a particular song from among 30 million others, or to play a live 24x7 radio.

That said, while these features can get people interested enough to try Apple Music, the platform is far from a disruptive innovation that can ensure sustained interest beyond the free 3-month trial. Apple needs to reinvent the business model in the music industry the way Netflix did in TV programming. To create a similar stickiness, Apple needs to impact our music consumption behavior at three levels:

  • Content
  • Control
  • Curiosity

Content – From the Netflix experience, we know that exclusive content is a significant factor in the success of a streaming platform; this not only drives viewership, but also ensures subscriber satisfaction. Apple Music is already testing these waters with Dr. Dre’s album Compton: A Soundtrack, a loose tie-in to the film Straight Outta Compton, being released exclusively on Apple Music and iTunes. With 25 million streams around the world in its first week, and nearly half a million downloads through Apple’s iTunes store, the album has already generated tremendous traffic for Apple. And wouldn’t it be crazy if the next Taylor Swift album was launched exclusively on Apple Music, too? Now let’s think about the international audience – considering that a good part of the 800 million iOS users are outside the US, Apple needs to work harder to get everybody truly on board. At first glance, it seems Apple might have to engage with more local label partners, but we also found that many of the same songs can be found on iTunes for purchase. So it is more a matter of integration and access to entice international listeners with ‘glocal’ content.

Another content-centric feature Apple Music seems to be missing is the ability to play videos. Just a month before the launch of Apple Music, Spotify upped their game by adding a video feature to their app. These videos will be powered by the same algorithms that choose music depending on the time of day. Needless to say, the video feature is a competitive imperative, and a link into Apple TV might make sense. However, given that Spotify has already tied-up with many big video companies such as TED, BBC and MTV, Apple needs to move fast.

Control – Apple Music can start giving users more control. While in theory, you can see your downloaded / ripped collection side-by-side with your streaming subscription, it works only for tracks that are also on the iTunes library, making it specially challenging for those looking for local content outside the US, some of which is not on iTunes. Sure, you can upload everything on iCloud, but then for the matched songs, the app plays the version that is in your iTunes library and not the one saved on your PC / Mac, in line with Digital Rights Management (DRM) implementation. While everyone respects DRM, Apple Music needs to ensure that it gives its listener what he or she wants to hear. Apple can leverage its strong relationship with wireless service providers and provide music streaming that does not consume its subscribers’ data usage. This big differentiator is sure to excite subscribers.

Curiosity – The iPod eclipsed other playback devices largely because it kindled our latent need to carry our entire music library with us. Unfortunately, Apple Music doesn’t tap into any such latent need. While having access to 30 million songs is nice, that by itself is not incentive enough for fans to pay for a music subscription service. Apple needs to make fans curious about new music, thus giving them a nudge towards greater music discovery and consumption. Admittedly, the ‘Connect’ feature is a step in right direction. But given that the app lacks a social platform where friends can tag each other, the platform is reactive at best. Apple cannot depend on users to find the news about their favorite artists. Implementing a feature to proactively take a fan to Connect or to bring the latest news about the artist currently being played might be a good next step. And while at it, Apple Music might also consider implementing a rewards program – depending on the activities that the fans perform on Apple Music, they get reward points, may be one point for listening to a song, two for loving it, three for adding it to My Music and so on, and those with most the reward points win tickets to the annual iTunes Music Festival, and maybe even an exclusive rendezvous with their favorite artists.

Apart from generating stickiness, Apple also needs to find ways to harness all the unique user data that the platform generates. Using this data for user profiling and recommendation engines is very basic, and advanced platforms like Spotify use this data as the backbone of their freemium model by gaining insights into the context in which fans listen to the music – for example, there are hundreds of thousands of barbecue-themed playlists on Spotify, and when someone plays one of these playlists (combined with other environmental cues), Spotify can be fairly certain that they are having a party. This understanding of the context helps them customize advertising for non-paying users. Since Apple Music does not have an ad-supported offering, they will have to do next-level harnessing of the data if they want to be the number 1 music app in the market.

In conclusion, Apple was smart to acquire Beats Music (3M subscribers) and lay the foundation of a streaming music app. However, in the intensifying contest over streaming music, all numbers related to Apple have been scrutinized for signs of whether its early performance represents fast or slow progress for a company of its vast scale. Apple, long the biggest retailer of music, has more than 800 million customer accounts around the world, but as a late entry to streaming, it has to rely heavily on the heft of its brand to compete in an increasingly crowded market … and perhaps bring in a little more pizzazz!

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