What Apple's Streaming Service Will Need to Succeed

The world doesn't need a typical subscription service. It needs a typically great Apple product.

Apple will announce a new subscription music service today (June 8) at its annual Worldwide Developers Conference. It's not hyperbole to say Apple's entry into subscription music could hasten both the rise of paid subscription service and the demise of the paid download. While streaming has become a common way to experience digital content, and paid video streaming is now commonplace, the paid music subscription format has failed to catch on. Apple has the potential to change that.

Some aspects of the service will be routine. Apple's service, expected to launch at the end of the month, is believed to carry the standard $9.99-per-month price tag and offer a common 90-day free trial period. With a few exceptions, it will offer the same multi-million-track catalog as its competitors. It will be available to both iOS and Android users.

But Apple Music, as is thought to be called, cannot be a routine product. It will need to stand out from Spotify, Tidal, Rhapsody and other music streaming services. It must improve on the shortcomings of Beats Music, the subscription service Apple acquired last year. It should leverage the purchase history of the iTunes Music Store and streaming history of iTunes Radio and iTunes Match. Above all, Apple Music should have the usability and excellent design that are hallmarks of Apple products.

The music industry wants desperately to regain some -- if not all -- of the revenues lost over the last 15 years. Record labels received $1.57 billion globally from subscription services last year, according to the IFPI. Apple has the potential to push that number substantially higher. At the very least, Apple Music will capture market share from competitors. But Apple could be the engine that grows the subscription market and pushes a niche format into the mainstream. In the former scenario, Apple kills the weakest companies. In the latter scenario, everyone benefits.    
 

WHAT APPLE MUSIC MUST HAVE

Better curation. Beats Music failed to catch on, in part, because its human editors told people what they should hear rather than what they were likely to enjoy. A case in point is Beats Music's ever-present "influences" playlists. Whether it's rock, rap or R&B, the service peppered users with artists that influenced more recent artists. In contrast, a person with DJ experience has a better understanding of what people want to hear -- even if they don't know it -- and leaves the conversation of what people "should" hear back for the industry's margins.

Personalities. It's good that Apple has hired a number of DJs, most notably former BBC Radio 1 host Zane Lowe. Subscription services have until now avoided the personality-driven programming of traditional radio, choosing instead to hide their human editors and recommendation algorithms. It's a missed opportunity. Between radio's numbers and SiriusXM's nearly 28 million subscribers, there's ample evidence radio programming attracts the masses.

One-button, on-demand streaming. Apple is renowned for product design that elevates simplicity above all other attributes. One-button streaming is the simplest way to get people listening. Beats Music's confusing radio feature, the Trent Reznor-designed 'The Sentence', is the antithesis of simplicity. To reach the mass market, Apple must offer product features that work the best for the most people. Cute, clever features will only alienate the mass market.

Overlap with iTunes Music Store, iTunes Match and iTunes Radio. Apple will leverage the popularity of the iTunes in attracting subscribers to iTunes Music. The company has in the neighborhood of 800 to 850 million credit cards on file (although apps, not music, are the most popular content at iTunes). Even so, tens of millions, if not hundreds of millions, of people around the world have purchased music at the iTunes Music Store. This history can be leveraged into an on-boarding process that weakens one of Spotify's advantages: people don't want to abandon their playlists and start from scratch elsewhere. A download purchaser or iTunes Match user should enter Apple Music as a familiar customer rather than a fresh face. Apple can leverage its knowledge of these consumers to make Apple Music immediately familiar and navigable. iTunes Radio can help, too, by incorporating a user's listening history into Apple Music recommendations.  


WHAT IT WILL BE NICE TO HAVE

Exclusive content. The iTunes Music Store has it. Spotify has it. Tidal has bet its future on it. Apple Music will need it, too. Because services have (more or less) the same, large catalog of songs, an important selling point for subscription services music that can't be found at competing services. At the very least, exclusive content attracts media attention. At best, exclusive content is an important component of a service's larger marketing strategy.

Podcasts. One would guess the spoils of Apple's acquisition of Swell, a podcast app, would appear in Apple Music eventually. Podcasts would give Apple Music a better in-car experience and increase pressure on not just Pandora but terrestrial radio. But in-car streaming is still a niche activity and Apple has time to wait. Only 35 percent of Americans have ever listened to Internet radio in the car, according to the Infinite Dial 2015 report.

Ownership of master recordings. There has been speculation that Apple will buy a record label. A rumor surfaced that Apple was going to acquire Big Machine, the home of Taylor Swift, although the report was pulled and the story wasn't progressed any further. In fact, predictions that Apple will buy a record label have existed for many years. But instead of acquiring music rights, Apple has invested in technologies that offer higher return on investments. After all, Apple has been successful licensing content rather than buying it. But it's noteworthy that Apple is a laggard, not a leader, in music streaming. The arms race for exclusive music content could push Apple to buy a label to create a point of differentiation. In the near term, however, Apple Music can leverage exclusive DJ personalities and its other assets -- product design, hardware integration -- and simply license music content.