The Promise of Cloud Music Streaming

Talks are on again between the record labels and Spotify, the European streaming music service looking to expand to America.

Billboard is reporting that after previously failing to persuade the labels to license music for the Spotify service using the “freemium” model, the major labels are all ears to see if Spotify can convince them to do a deal for an end of year launch.

The labels never really cared for Spotify’s free model and Spotify is desperate to get started in the U.S. because Apple has its stream coming in the not too distant future and services like Spotify have not done well.

Spotify is so desperate that they claim to be open to a short-term deal with the labels. That’s a deal I wouldn’t make. But they have no choice. The labels are playing hardball.

The hardball matches their hard heads that may also get in the way of allowing Apple to offer music on the cloud. There is considerable debate as to what is going on with Apple and the labels over this issue. You’ll note that Apple relented on its long-held one-price (99 cents) for all downloads policy and the labels got their way – or as I like to call it, fewer downloads for less revenue.

Apple’s stream – the one I believe Spotify fears most – is likely to make a consumer’s personal iTunes library available anywhere at anytime through various mobile devices. That is, the music is there for the taking.

The real question is whether Apple needs a new agreement with the labels to do this. Right now, the labels are so destructive you cannot point to one single strategic decision any of them have made in recent years that was good for them individually or collectively.

Spotify has more than 7 million users around the world with only 500,000 of them paying about $15 per month for the premium version.

Rhapsody, which also has a more traditional subscription service, is down to about half a million subscribers at this point and declining.

This is not exactly a boom waiting to happen.

Unless, Apple can convert many of their iTunes users into streaming fans for a monthly fee.

Look to the way Apple handles the consumer cost of being connected to the Internet on the mobile iPad platform.

AT&T again, but iPad users only need to subscribe to the service month-by-month. No long-term commitments or discounts. I get an email telling me the next month’s AT&T iPad service is about to kick in and I have time to cancel anytime if I’d like. This may be part of the Apple strategy with streaming audio.

Pay as you go.

Don’t pay and you can’t access your music library on your mobile devices, but you still own what you bought and can listen on other devices.

I think Apple is up to other things, too.

I would not be surprised to see the iPad become a Crestron or TV remote that eventually works with Apple TV. Now that move could make Apple TV go from a Steve Jobs admitted hobby to yet another big business.

So, we would be able to watch TV on our iPads but also communicate with Apple TV and watch our television shows and movies on-demand right there on a big HD screen.

Apple TV right now is burdensome. I don’t like it. Takes too long to download content. But with a stream, all that changes. Buy “Gossip Girl” and have it available for your viewing pleasure anywhere and on any device that can access that stream.

You own it, but you store it on the cloud.

That’s the future and it explains why Spotify is so terrified of not being able to launch in the United States in a timely fashion.

A bigger issue is whether Spotify is necessary at all?

My view is that Pandora survives anything Apple comes up with because it uses a well thought out music genome to identify a listeners musical preferences. That in and of itself is cool and will never go out of style.

For everyone else there is choosing your own music and storing it on the cloud.

I can tell you from working with young people that while they like their iPods, they are also bored with their iPods. Ask and they will tell you.

If this isn’t a wakeup call to the radio industry to reinvent itself, I don’t know what is.

Consumers need another music service like coffee drinkers need another Starbucks.

Pandora is golden.

Apple’s cloud will eventually be a smash hit.

Now who is going to entertain people on mobile devices with short-form, personality and expert-based content?




It is likely not going to be a radio company because they can't see this, but radio is the perfect incubator for new media content.

I’ll bet you some former radio employees will jump into this void and see the next growth business ahead – mobile entertainment not just music available everywhere on-demand.

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