With 10 million subscribers a month, Spotify is the biggest music streaming service to beat. However, Apple, with its $593 billion market valuation and nearly 1 billion iTunes users, is in a prime position to kick Spotify off the top of the industry.
With rumors of negotiations going on between the iPhone maker and major music labels to drive the price of streaming down from the Spotify standard of $10, Spotify and other music streaming services could be in for some major beating.
A report by Re/code cites sources "familiar with the company's thinking" that Apple is already on the negotiation table for a revamped version of rights and features, including an overhauled pricing structure that will allow Apple to sell streaming music by less than $10, although they did not specify what new features Apple was working on and how much it plans to charge users for its music streaming service.
Singer-songwriter and businessman Bono of U2 revealed over Irish radio station 2FM that U2 will help Apple reach 1 billion iTunes users, implying that streaming and the recently acquired Beats Music streaming app is important to Apple.
"[One billion users is] 1/7 of the earth's population. If 1/10 of those people were to be part of a subscription service like Spotify has, and I'm a huge Spotify fan, at $10 a month... Do the math. That's a billion a month. That's $12 billion. That's bigger than the entire music business coming out of one company," Bono said. "Even if it was 5 percent, now musicians are suddenly in a game that people are ready to pay for, their lives are changed."
Just like Spotify, Beats Music charges $10 a month for users to listen to their favorite music. Unlike Spotify, however, the user-curated streaming service only has a few hundred thousand users. Even then, out of the 10 million paying subscribers on Spotify, only 25 percent pay $10 every month for three months, according to a recent survey conducted by Midia. The ideal price, from a consumer's point of view, is pegged at around $3 or $4 a month.
One major hurdle for Apple is convincing the music labels to agree on something that will further reduce its revenue. However, the company's track record of negotiations show Apple has a convincing upper hand when it comes to driving hard bargains. Steve Jobs was able to persuade the labels to push MP3 downloads, something they have been resisting for a while, and Tim Cooks succeeded in enlist major credit card providers and retail stores to jump aboard Apple Pay. It won't be a surprise if Apple convinces the record labels to take a smaller portion of the pie, while delivering music streaming services to more users at lower costs.
