While variety and competition are typically a good sign in most other industries, the same doesn't seem to hold true in the music industry. An increasing number of not-so-different streaming services are cropping up from companies like Amazon, iHeart, and Pandora, says Cortney Harding.
Guest post by music tech strategist Cortney Harding
With the torrent of new streaming service announcements in the last few weeks, it’s tempting to imagine Oprah standing in front of music fans, yelling “You get a streaming service! And you get a streaming service!” to shouts and cheers.
Amazon will be unleashing its $9.99 service soon, and Pandora will roll out a discount service on the back of its Rdio acquisition last year. iHeartRadio, whose stock price remains depressed after nose-diving last year, will release a streaming platform in January 2017, and Montreal-based Playster, which offers unlimited streaming subscriptions in several content verticals, announced deals with two of the three major labels.
In many other industries, this would be fine, and in fact the sign of a healthy market. While grocery shopping today, I counted the variety of ketchup brands and got to a dozen before I realized I looked like a lunatic and wheeled my cart to the next aisle. The big problem with music is that the factors that make it possible to compete in other industries don’t exist in the music streaming space. Ketchup brands can offer a wide variety of prices for essentially the same product, whereas music streaming services can only offer the $10 a month package and a more limited, cheaper package. Offering the same product at a different price is something streaming services haven’t been able to figure out how to do yet, mostly due to inflexibility from the labels.
Not only are streaming services finding it difficult to compete on price, they can’t really compete on content. Exclusives seem to be on their way out and were never all that effective at converting users to begin with — but now the streaming services are really forced to operate with essentially the same catalogue. Curation has now become the name of the game, especially with recent research showing that more people are listening to playlists than albums. Spotify is the winner here, for now, but it won’t be long before Apple Music and other services start hiring folks who can build another version of Discover Weekly — and then we’re right back to where we started.
Labels hamstring streaming services in other ways as well. To be competitive in any way, streaming services need to have the catalogues of all the majors and indies — and those don’t come cheap. Labels hold all the power in this situation, especially the bigger labels. If a streaming service doesn’t want to pay what Universal (or Sony, or Warner) wants, then they can simply refuse to play ball and walk away. Given the rapid growth in streaming the labels of course have an interest in making their content available — but the two parties seem to be locked in a pact that ends in mutually assured destruction, rather than a situation based on cooperation and collaboration.
This, then, is the central reason why having many streaming services is terrible — because they only way the economics work is if they scale massively, and because the market is so fractured, it’s unlikely any of them will. A monopoly certainly isn’t the answer, but neither are the number of options we’re about to have. If people come in via Amazon, say, or iHeart or Playster, they’re likely to stick with what they know unless the service shuts down and they’re forced to go elsewhere. Because consumers can have their needs met with just one services (as opposed to streaming TV, say, where it makes sense to have both Netflix and Hulu because they each have enough different content), users are unlikely subscribe to multiple music streaming platforms, and they’ll all cannibalize each other’s audiences. If no one can get to scale, then no one will be profitable, and the entire thing collapses.
Apple Music, YouTube Music, and Amazon all have less to be worried about in this situation. Amazon has shown it has no problem treating verticals as loss-leaders for long periods of time, and Google and Apple are some of the most profitable companies in the world — they can just write down their music investments, it might mean a few fewer massage therapists on campus. But stand-alone services will have a much harder go of it.
All these streaming services are also still forced to compete against free YouTube, stream ripping software, and piracy sites as well, leaving them in a disadvantaged position from the day they launch. They’re already lost a big chunk of the potential market to free platforms, and then they’ll have to compete for an ever-shrinking pie — eventually, they’ll simply run out of users.
There are no easy solutions in this situation. In the labels’ minds, they have every right to place multiple bets and see which one shakes out, and anyone has a right to launch a streaming service as long as they get the licenses they need. Regulating the streaming market would be anti-competitive, and not good for anyone. But streaming services can’t keep launching forever. Already we’re starting to see consolidation and services going under, and it’s a trend that’s bound to accelerate.