Reinventing the music sector

Ricardo Pérez. Professor. IE Business School

29 June 2015

Following Apple’s decision to launch a music streaming service, the question to ask is it possible to survive when the king of your sector decides he wants to take your business off you?  

On June 8 Apple announced the launch of its streaming music service. It will be competing directly with Spotify, which this week announced that it now has 20 million users paying for its services, out of a total of 75 million. And so the struggle begins. It is interesting because Apple will be offering a free trial so that customers can try out the service and, they hope, get hooked. So it is possible that in a couple of months Apple has as many paying users as Spotify, or more. Moreover, Spotify is sure to improve with all the free publicity it has been getting. 

This could make for some interesting dynamics, given that Apple will surely try to have exclusive agreements as it did with books to try to beat Amazon. The big difference is that in the case of music it has a great deal more experience. Remember that the iPhone came about as a result of extending the technological platform of its first really dominant product, namely the iPod. What is at stake here is more than who is going to be the industry leader. It’s about surviving the fact that the king of technological platforms decides that he wants to take your business off you.

It goes without saying that the battle will involve talking about unfair pricing, about how much artists and distributers earn, or if it is worth selling exclusive rights. We are seeing something that will happen in the near future in other markets. Will it be possible to stop the kings of the platform? Payments, connected cars or news, they’re all part of exactly the same story. There are many more. What Spotify does well or badly depends on the others. The key will be to offer more value to the customer, and forget about definitions of “sectors” or “industries.” Defining a radio station or a music collection is no longer interesting. Those that want to defend history at any cost are destined to fall by the wayside.

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